Global Markets Sell Off Amid Trump Administration Turmoil; Gold Shines

Jay Anderson
May 19, 2017

Spot gold was up 0.2 percent at $1,263.06 an ounce at 1102 GMT, while US gold futures for June delivery were up $4.20 an ounce at $1,262.90.

Spot gold was down 0.1 percent at $1,258.75 an ounce at 1320 GMT, having touched its highest since May 1 at $1,265.04.

U.S. President Donald Trump is under pressure to explain whether he tried to interfere with a federal investigation after reports that he asked then-FBI Director James Comey to end a probe into his former national security adviser Michael Flynn.

All of these are positive for the price of gold for two main reasons.

The political uncertainty over the fallout seemed to drive markets lower.

Upwards pressures come from gold's risk mitigation in the context of the North Korean missile test, the large-scale cyber-security scare and controversies surrounding United States president Donald Trump's dealings with Russian and handling of intelligence.

Gold prices pared gains as the USA dollar came off its lows and US 10-year Treasury yields bounced up from a 1-1/2-week low.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

"Continued unpredictability of the Trump administration, North Korea flexing its muscles again and weaker data coming from the USA has helped bring back some interest", said Ole Hansen, head of commodities strategy at Saxo Bank.

Trump confident travel ban is lawful
He also said the President has since clarified remarks made during the campaign, saying Trump was referring to Islamic terrorists. Last week, a federal judge in MI ordered the Trump administration to turn over communications from former NY mayor Rudolph W.

The recent string of controversies intensified doubts that Trump would be able to follow through on his campaign promises for tax cuts, deregulation and fiscal stimulus. The White House came out and denied that such information was shared.

Another factor which led to the fall of gold was the rally of USA dollar index.

The dollar has taken a hit from solid eurozone economic data, a fall in USA yields on heightened turmoil in Washington and downbeat housing data.

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.

European shares were down 0.8 percent on Thursday, while world stocks extend their steepest fall in more than six months.

Silver futures lost 0.233 dollar or 1.38 percent to close at USD 16.64 per troy ounce at the COMEX.

US gold futures settled up 0.2 per cent at $US1,230.

The precious metal was valued at $1,255 an ounce by Thursday afternoon, after a spike had sent the price touching $1,265 earlier in the day.

Other reports by BadHub

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