Gold on Monday extended its biggest weekly gain in five weeks as the U.S. dollar fell against the euro, while U.S. political turmoil fueled demand for bullion as a safe-haven and reduced expectations of rapid U.S. interest rate rises. Spot gold was up 0.5 percent at $1,260.96 an ounce at 3:05 p.m. EDT (1905 GMT), while US gold futures settled 0.6 percent higher at $1,261.40.
The metal advanced by 2.2 percent last week as the furor over U.S. President Donald Trump’s alleged links to Russia and his firing of former Federal Bureau of Investigation chief James Comey raised concerns about his ability to push through promised fiscal stimulus.That caused a rush to safe-haven assets such as gold and drove U.S. stocks, the dollar and U.S. bond yields lower, reducing the opportunity cost of holding non-yielding bullion and making gold cheaper for holders of other currencies.
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U.S. stocks gained on Monday, but Treasury yields were little changed and the dollar plunged to a six-month low when the euro rallied after German Chancellor Angela Merkel said it was “too weak” for Germany. Gold investors were looking to news from Washington, said Commerzbank analyst Carsten Fritsch. “If this escalates further and impeachment claims intensify, Trump will find it very difficult to push forward his ambitious tax cut and infrastructure spending plans,” Fritsch told the Reuters Global Gold Forum on Monday. INTL FCStone analyst Edward Meir said: “This should be bullish for gold since it should keep the (U.S.) Federal Reserve more dovish on the rate front for a little while longer.” Higher interest rates would pressure gold prices because they raise bond yields and tend to boost the dollar. Dallas Fed President Robert Kaplan, a voter this year on the Fed’s policy-setting panel, said on Monday the U.S. central bank should keep raising rates before year-end, though he was not yet ready to declare victory on inflation. Investors’ net long position in COMEX gold meanwhile has fallen to a two-month low, U.S. Commodity Futures Trading Commission (CFTC) data showed late Friday. “Platinum stood out last week as the only precious metal posting gains in positioning. This week’s CFTC report is likely to show further short-covering,” said Joni Teves, strategist for UBS Global Research in a note. In other precious metals, spot platinum rose 0.5 percent to $942.90. Silver was up 1.9 percent at $17.14 an ounce, after rising to the highest in three weeks at $17.21. Palladium was 1.44 percent higher at $770.40, after falling to $748.97, the lowest since March 15.