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Gold may jump higher
Published on 26.01.2017 21:49

The gold price is under pressure today on the back of a stronger US dollar but some analysts

believe this is about to change as the greenback runs out of steam.

At 2.00pm (GMT) gold was trading at $1.190 down from $1.197 in yesterday’s trading.

A stronger U.S. dollar makes commodities more expensive for holders of other currencies as they

are priced in US dollars therefore reducing demand, while higher Treasury yields mean

U.S. bonds are cheaper for traders looking for other investments apart from gold

"The dollar is a little bit stronger this morning, yields are up a bit and that's why gold is below

1,200," said Julius Baer analyst Carsten Menke. "But overall the appreciation of the dollar seems

to have stalled, we could see a reversal."

Earlier this week the gold price jumped to a 2 month high on the back of a weaker US dollar and

uncertainty surrounding the policies of US president Donald Trump who noted earlier in the

week that he would like to see a weaker US dollar to make the American economy more

competitive.

"Trump’s incoming administration is among the least experienced in public service of any in

history and this will lead to a steep learning curve for several departments. While it is generally

expected that the Republican-controlled Senate and House of Representatives will be supportive

of Trump’s policies, collaboration is far from certain as there has been an inordinate amount of

pushback from senior members of the Republican Party on various fronts” noted Cantor

Fitzgerald analyst Rob Chang.

"In addition, the unconventional and often erratic behavior of Trump may also be a constant

wildcard. We point to his interesting and frequent use of twitter as a prime example of this as a

single tweet can influence markets”

“These issues point to a great degree of political and policy uncertainty for the U.S., which will

make the safe haven feature of gold very attractive." He added.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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