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Gold prices dip on profit-taking amid US political tension
[BENGALURU] Gold prices weakened after touching a more than two-week high on Thursday, weighed down by profit-taking amid political turmoil in the United States.
The yellow metal rose about 2 per cent on Wednesday in its biggest one-day percentage gain since June last year, as pressure on US President Donald Trump deepened following reports that he tried to interfere with a federal investigation.
That came after a turbulent week when Mr Trump fired FBI Director James Comey and discussed sensitive national security information with Russia's foreign minister, causing investors to question whether Mr Trump can push through tax cuts and deregulation.
"We are seeing some squaring off probably from Asian traders and perhaps just a bit correction from the moves overnight,"said Jeffrey Halley, senior market analyst at Oanda.
"I would caution that the gold rally has been driven by political news and not necessarily fundamentals. Should the political storm die in Washington, the rally will lose steam."
Spot gold was down 0.2 per cent at US$1,258.02 per ounce by 0805 GMT after earlier touching its strongest since May 1 at US$1,263.02. The yellow metal settled higher in the five previous sessions.
US gold futures were nearly flat at US$1,258.40 an ounce.
"Asia saw mixed interest on Thursday as profit taking battled against underlying interest," MKS trader Sam Laughlin said in a note.
"We are likely to see profit taking weigh upon the metal over the short term, however the current political climate in the US should see underlying interest continue to support the metal around US$1,250."
Gold is used as an alternative investment during times of political and financial uncertainty.
Spot gold may retrace moderately to a support at US$1,252 per ounce, before retesting a resistance at US$1,264, according to Reuters technical analyst Wang Tao.
"I think prices have already been pushed up and we might see reversing of gold prices in one or two days. People are likely to go back to basics and see what the interest rates are going to be," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
On Thursday, the US dollar stood near six-month lows against a basket of major currencies, while Asian stocks fell, with MSCI's broadest index of Asia-Pacific shares outside Japan dropping 0.6 per cent.
Among other precious metals, silver slipped 0.6 per cent to US$16.75 an ounce, platinum was down 0.5 per cent at US$936.90 an ounce, while palladium shed 0.4 per cent to US$778.40.