Gold price above $1,200 for first time in two months 


A New Year rally for the gold price was given an unexpected “Trump bump” yesterday, says Reuters.

Having risen from a low of $1,124 an ounce in early December, the metal hit a high of around $1,187 earlier this week.

However, after an initial dip, it rebounded strongly yesterday after Donald Trump failed to offer detail on inflation-boosting spending plans during his first press conference as president-elect, says the Financial Times.

Trading rose above $1,200 an ounce for the first time in two months and was around $1,204 at around 9.30am in London today.

Safe haven assets such as gold had been expected to benefit from the election of the populist Republican, but as markets settled down quickly, attention instead turned to plans to inject $1trn into the economy.

This could markedly drive up inflation at a time when the labour market is already strong, giving policymakers an incentive to increase interest rates.

As rising rates tend to be bad for non-yielding assets such as gold and good for the dollar against which the metal is held as a hedge, this triggered a prolonged sell-off for the metal.

Trump’s press conference, which also contained a broadside against listed pharmaceutical giants who have been “getting away with murder”, prompted a fall in equities and the dollar and boosted gold to a seven-week high.

Trading in gold has been bullish in early 2017, but with big investors taking flight amid forecasts from the Federal Reserve for three rate rises this year, experts have said the rally will run out of steam at around its current level.

In contrast, there are expected to be geopolitical bumps in the road, not least from the mercurial incoming president, any and all of which could trigger renewed safe-haven demand.

Outside the US, Reuters cited elections in France, the Netherlands and Germany – and, of course, the unfolding Brexit drama, all of which will create tension in the EU.

Source: THE WEEK – Gold price above $1,200 for first time in two months

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