Gold hovers near 3-month highs; political uncertainty provides support

[BENGALURU] Gold held near three-month highs on Thursday as political risks from elections in Europe and worries over US President Donald Trump's policies buoyed safe haven demand for the bullion.

Spot gold dipped 0.1 per cent to US$1,240.46 per ounce at 0243 GMT. On Wednesday, the metal touched its highest since Nov 11 at US$1,244.67.

US gold futures rose 0.2 per cent to US$1,242 an ounce.

"Gold prices will be a little bit rangebound with some upside bias for the next few weeks or so," said OCBC analyst Barnabas Gan."

"The risk factors have not really changed so far - we're talking about Donald Trump, we're talking about the political situation in Europe and because of all these factors, we do expect market watchers to stay cautious into the months ahead to gauge how the global economy is going to perform."

Spot gold may edge up to US$1,249 per ounce, as it has cleared a resistance at US$1,237, according to Reuters technical analyst Wang Tao.

Investors are concerned about the strong showing in the French presidential race of far-right candidate Marine Le Pen, who has promised to take France out of the euro zone and to hold a referendum on European Union membership.

Controversy over US President Donald Trump's temporary travel ban on people from seven Muslim-majority countries has recently boosted gold as a safe-haven asset.

"Geo-political risks continue to underpin gold in the face of the prospect of higher US interest rates this year," said Jeffrey Halley, senior market analyst at Oanda.

"Increasing hostilities in the Ukraine, Greek bailouts, French elections, Iran-US sabre-rattling have all combined to see investors flee to safe havens, of which gold is the main beneficiary."

The Fed raised rates for only the second time since the financial crisis in December, and most Fed policymakers agree that three more rate hikes this year would be appropriate.

Investors' bullish stance in gold is underpinned by an increase in net longs by speculators and a rise in holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund.

SPDR holdings rose 0.68 per cent to 832.58 tonnes on Wednesday from Tuesday, rising for a sixth straight session.

Spot silver fell 0.4 per cent to US$17.71 an ounce after hitting its best since Nov 11 at US$17.86 in the previous session.

Platinum was firm at US$1,013.90, after touching its best since Nov 9 at US$1,019.20 on Wednesday.

Palladium rose 0.2 per cent at US$769.97.

REUTERS