Gold edged lower on Wednesday, although still holding near its highest in seven months, supported by a weaker dollar ahead of key political and economic events that are expected to stoke bullion's safe-haven appeal.
Gold edged lower on Wednesday, although still holding near its highest in seven months, supported by a weaker dollar ahead of key political and economic events that are expected to stoke bullion’s safe-haven appeal. A national election in the UK, a European Central Bank policy meeting and former US Federal Bureau of Investigation (FBI) Director James Comey’s Senate testimony are all occurring on Thursday.
The events have the potential to boost the appeal of bullion, which is often used as an investment option during times of political and financial uncertainty. A combination of geopolitical concerns, including the UK elections and a wilting U.S. dollar as Wall Street loses faith on U.S. President Donald Trump delivering on his campaign promises, have kept gold’s bullish streak going, said Jeffrey Halley, a senior market analyst at OANDA.
“With the degree of uncertainty around as we head into the latter half of the week, there would appear to be no reason for gold’s march higher to peter out,” Halley said. Spot gold fell 0.1 percent to $1,291.66 per ounce at 0350 GMT. On Tuesday, it rose 1.1 percent and hit its highest level since November last year at $1,295.97 an ounce. U.S. gold futures for August delivery dipped 0.3 percent to $1,294.2 an ounce.
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“At $1,290, gold prices look too rich for our comfort. It has been rallying simply because of safe-haven demand,” OCBC analyst Barnabas Gan said. “Once this driver that underpins the strong gold price disappears, beyond Thursday and till the end of June, expect gold to lose its lustre,” he said. A U.S. interest rate hike in mid-June should yield a more expensive greenback and pull gold prices lower, Gan said.
British Prime Minister Theresa May looks set to increase her parliamentary majority in Thursday’s election, an opinion poll showed on Tuesday, although another survey suggested the race with the opposition Labour Party was neck and neck. Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, on Tuesday rose 0.49 percent to 855.16 tonnes.
The dollar index held steady against a basket of major currencies but stayed close to the near-seven month low hit on Tuesday. Among other precious metals, spot silver gained 0.1 percent to $17.68, platinum slipped 0.2 pct to 954.40, and palladium was up 0.1 pct at $854.30. On Tuesday, palladium hit its highest since September 2014 at $858.70; Silver touched a high of $17.75, its strongest since April 25; and platinum rose to a high of $967.50, highest since April 24.