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PRECIOUS-Gold at 2-week peak as Trump turmoil hits dollar, U.S. yields
May 17, 2017 / 11:51 AM / 2 months ago

PRECIOUS-Gold at 2-week peak as Trump turmoil hits dollar, U.S. yields

4 Min Read

    * Gold up 1.8 pct in fifth straight session of gains
    * Breaks above technical resistance at $1,245
    * Scandals dampen hopes of Trump stimulus
    * Dollar falls to lowest since Nov. 9

 (Updates prices; adds comment, byline, NEW YORK dateline)
    By Marcy Nicholson and Peter Hobson
    NEW YORK/LONDON, May 17 (Reuters) - Gold rose to a two-week
high on Wednesday as political turmoil in the United States
reduced expectations of aggressive interest rate rises this
year, pushed down U.S. bond yields and drove the dollar to its
lowest in six months.    
    Lower yields reduce the opportunity cost of holding
non-yielding gold, while a weaker dollar makes bullion cheaper
for non-U.S. investors. Higher interest rates would push yields
up and likely boost the dollar. 
    Spot gold        rose for a fifth day and was up 1.8 percent
at $1,258.28 an ounce by 2:40 p.m. EDT (1840 GMT), after hitting
$1.260.20, the highest since May 1. It was on track for its
biggest one-day gain since June 2016. 
    U.S. gold futures         settled up 1.8 percent at
$1,258.70. 
    "Downward movement in yields and the dollar have given
support to gold," ABN AMRO analyst Georgette Boele said. "And on
top of this you get political uncertainty which is denting the
dollar." 
    U.S. President Donald Trump is under pressure to explain
whether he tried to interfere with a federal investigation after
reports that he asked then-FBI Director James Comey to end a
probe into Trump's former national security adviser, Michael
Flynn.             
    "Investors' worry is that the president may have obstructed
justice, which is a potentially impeachable offence," said Fawad
Razaqzada, technical analyst for Forex.com.             
            
    That follows a turbulent week after Trump fired Comey and
discussed sensitive national security information with Russia's
foreign minister, causing investors to question whether Trump
can push through tax cuts and deregulation.                   
    "This has driven monies into safe-haven buying which is
supporting gold," said Miguel Perez-Santalla, vice president of
Heraeus Metal Management in New York.
    The dollar fell to its lowest since Trump was elected in
November and is likely to drop further, Boele said. Stocks fell
and 10-year U.S. Treasury yields were at the lowest since April
21.                          
    An unexpected drop in U.S. homebuilding activity, reported
on Tuesday, meanwhile raised new doubts about how many times the
Federal Reserve will raise interest rates this year.
            
    Futures traders are pricing in a 66 percent chance of a June
rate rise, down from around 90 percent earlier this month,
according to CME's FedWatch Tool.            
    Technically, gold breached resistance at its 200-day moving
average and Fibonacci retracement, both around $1,245,
triggering technical buying. 
    Silver        was up 0.6 percent at $16.92 an ounce and
platinum        was 0.7 percent higher at $944 an ounce.
Palladium        was down 2.2 percent at $776.22.

 (Additional reporting by Vijaykumar Vedala and Swati Verma in
Bengaluru; Editing by Susan Thomas and Steve Orlofsky)
  

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