• Gold has risen to the highest in seven months on a slump in the US dollar to a seven-month low and on safe-haven demand driven by a rift in the Middle East, an upcoming European Central Bank meeting and the British election. Investors were also drawn to gold, seen as a safe place to park assets, by uncertainty around the testimony to a Senate committee by former FBI Director James Comey.
• A weaker US dollar makes gold cheaper for holders of other currencies, while lower yields reduce the opportunity cost of holding non-yielding bullion.
• Weak economic data from the United States has reduced expectations of rapid US interest rate rises this year, but the Federal Reserve is expected to hike rates at its June policy meeting next week. Interest rate rises push bond yields higher and tend to strengthen the dollar.
• Spot gold was up 1.1 per cent at $US1,294.34 an ounce by 2.25pm Tuesday EDT (0425 Wednesday AEST), having earlier touched its highest since November 9 at $US1,295.97.
US gold futures rose 1.2 per cent to settle at $US1,297.50.
• The dollar index, which tracks the greenback against six major rivals, was down 0.18 per cent at 96.624.
• Gold has risen more than 6 per cent since a low of $US1,213.81 in early May as political turmoil in the United States created doubts that President Donald Trump could enact economic stimulus, pushing down the dollar and bond yields.
• "Gold surged to highs since Election Day as geopolitical concerns with the UK election and Comey testimony both due Thursday as well as fresh tensions on the Arabian peninsula triggered strong buying in spot as well as options," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
• European Central Bank policymakers will take a more benign view of the economy on Thursday and will even discuss dropping some of their pledges to ramp up stimulus if needed, sources told Reuters.
• A decision by major gold consumer India to levy a sales tax on gold at 3 per cent rather than the expected 5 per cent was supporting bullion prices by spurring demand for physical metal, analysts said.
• From a technical standpoint, gold may be poised for further gains, analysts said.
• "The long-term bearish trend line that had been in place since the year 2011 has broken down and this could pave the way for significant long-term gains," said Fawad Razaqzada, market analyst at Forex.com.
"A decisive break above the last swing high at $US1,295 is what the bulls want to see now." In other precious metals, silver rose 0.9 per cent to $US17.67 an ounce, its highest level since April 25.
Reference: Business News, Reuters
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