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Gold hits 1-month high after Trump doubts knock US dollar, stocks

[LONDON] Gold rallied more than 1 per cent on Monday after US President Donald Trump's failure to push through a healthcare reform package on Friday raised questions over his ability to deliver promised tax cuts and spending plans.

That knocked the US dollar to a four-month low versus a currency basket and drove a drop in stock markets, with European indices sliding nearly 1 per cent in early trade and US stock index futures hitting six-week lows.

Spot gold was up 1.1 per cent at US$1,257.08 an ounce at 0930 GMT, having touched a one-month high of US$1,259.14. US gold futures for April delivery were up US$8.60 an ounce at US$1,257.10.

"Trump's spectacular failure to get his health bill through Congress raises concerns about his ability to achieve his goals on other policies," Saxo Bank's head of commodity research Ole Hansen said.

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"With stocks, the US dollar and bond yields lower and geo-political risks on the rise, gold may stand out as the commodity of choice at such time." Gold had already rallied sharply from its March 15 low following a less hawkish policy statement than expected from the Federal Reserve, which dampened expectations for near-term increases in US interest rates.

Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the US dollar, in which it is priced.

The metal ran into resistance in earlier trade at its 200-day moving average, currently at US$1,259 an ounce, a level that also halted last month's sharp price rally.

"If it were to rise lastingly above this threshold, we could see technical follow-up buying," Commerzbank said in a note."That said, an attempt to exceed the 200-day moving average proved abortive at the end of February, causing the gold price to shed almost US$70 in the subsequent days." The world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, reported an outflow of 1.8 tonnes on Friday.

US Commodity Futures Trading Commission data showed on Friday however that hedge funds and money managers boosted their net long positions in COMEX gold in the week to March 21, after two weeks of cuts.

China's net gold imports via main conduit Hong Kong rose 50.8 per cent month-on-month in February to 47.931 tonnes, data showed.

Silver was up 0.9 per cent at US$17.91 an ounce, off an earlier three-week high of US$17.938, while platinum was 1.5 per cent higher at US$975. Palladium was down 0.4 per cent at US$806.18, after hitting a two-year peak of US$815.40 on Friday.