Geopolitical risks cause surge in gold prices, transactions

Jon Howard
April 20, 2017

"Gold looks fairly attractive at the current juncture as a safe haven bet with geopolitical tensions on the rise and concerns ahead of French elections", Sugandha Sachdeva, head of metals, energy & currency research at Religare Securities, said, adding however that gold was still vulnerable to profit taking.

Platinum rose 0.5 percent to $975.80, while palladium dropped 0.2 percent to $793.40.

"As (gold) didn't manage to get through $US1,300 and due to light volumes during (holiday-related) European hours, gold consolidated until weaker USA economic data gave the yellow metal another push", said Giovanni Staunovo, commodity analyst for UBS Wealth Management.

That dwarfed any relief for market players after the U.S. Treasury department did not name China as a currency manipulator, avoiding an all-out confrontation on currencies between the world's two largest economies. Data on Friday showed USA retail sales fell for a second straight month in March and consumer prices dropped for the first time in just over a year.

Spot silver turned down 0.4 per cent to $US18.445 an ounce after touching a five-month high of $US18.649.

The yellow metal gave up some gains as the USA dollar rebounded against the yen from a five-month low of 108.11 hit earlier in the day.

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Meanwhile, the 10-year U.S. Treasury yield was at around at 2.21%, after falling to a low of 2.165% Tuesday, the lowest since November 10. Regional tensions have risen over the past weeks as US President Donald Trump has taken a tough rhetorical line with Pyongyang.

A jump in the pound to a five month high of $1.29 following Theresa May's announcement of a snap general election yesterday, saw the gold price adjust to $1,283 this morning having previously hit $1,291.98 an ounce yesterday.

The yield could now fill the chart gap between 2.150 and 2.168 percent made just after the US presidential election, some analysts said. It touched its highest since November 11 at $18.65 on Monday.

Reduced expectations for a Federal Reserve rate hike in June in wake of recent weakness in USA economic data further burnished the appeal of the yellow metal.

Gold prices rose to a fresh five-month high Monday, helped by a weaker USA dollar and continued concerns over geopolitical risk.

The Turkish lira jumped about 2.5 percent to 3.6300 per dollar versus 3.7220 on Friday after President Tayyip Erdogan snatched a victory in a referendum to grant him sweeping powers in the biggest overhaul of modern Turkish politics.

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