Gold hits 1-month high as US dollar weakens further

[BENGALURU] Gold prices rose to their highest level in one month on Thursday in light holiday trade and as the US dollar fell to a four-week low.

Spot gold was up 0.2 per cent at US$1,289.10 an ounce at 0322 GMT, after earlier reaching its best since Nov. 29 at US$1,289.92.

US gold futures were up 0.1 per cent at US$1,292.20 an ounce.

The yellow metal has risen for a ninth straight day and is on track to register gains of over 1 per cent this month and about 12 per cent this year.

"It's the thin market and the US dollar moving down that's pushing up gold," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

"If the US dollar continues to weaken, gold will be looking for US$1,300 again." There could be some additional buying heading into resistance at that level, Mr Leung said.

The US dollar was on the defensive on Thursday, facing headwinds from a dip in US 10-year bond yields, while commodity-linked currencies were bolstered by this week's rally in metal and oil prices.

Gold prices have risen from a near five-month low of US$1,235.92 touched earlier this month, as the US dollar weakened after the US Federal Reserve kept its outlook for three rate rises in 2018 unchanged and as investors remained divided over the impact of US tax reform on economic growth.

"Investors across the United States are sceptical about the future prospects of the economy as tax overhaul is expected to create a further deficit of US$6 trillion and tensions have been rising over North Korea's nuclear and missile programs," said Sugandha Sachdeva, vice president of metals, energy and currency research at Religare Securities Ltd.

Gold is used as an alternative investment during times of political and financial uncertainty.

"Furthermore, US dollar index treading water...is keeping prices buoyant. These all have worked in favour of the beaten down asset and the current backdrop has actually turned bullish for the yellow metal," Mr Sachdeva said.

A weaker US dollar makes greenback-denominated gold cheaper for holders in other currencies.

Among other precious metals, silver was 0.2 per cent higher at US$16.71 an ounce, after earlier marking its highest since late November at US$16.73.

Palladium was 0.1 per cent lower at US$1,059.49 an ounce, having touched its highest since February 2001 at US$1,069.50 an ounce in the previous session.

Platinum was up 0.6 per cent at US$922.60, after touching the highest since Dec. 5 at US$927.20 on Wednesday.

REUTERS