No Reprieve For Dollar As Trump Troubles Mount

Gold for June delivery on the Comex division of the New York Mercantile Exchange rose 0.35% to $1,234.34 a troy ounce.

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.

Gold surged almost 2 percent on Wednesday, its biggest one-day jump since Britain's June vote to leave the European Union, on reports that U.S. President Donald Trump had tried to intervene in an investigation into alleged Russian interference in last year's U.S. election.

Gold has risen after Trump's firing of Federal Bureau of Investigation director James Comey a week ago, as well as reports he shared intelligence with Russian Federation.

This inverse relationship between the USA dollar and gold has held throughout history and was one of the major reasons for the most recent gold rally from 2000 to 2010.

Meanwhile, a recent run of disappointing US economic data, including inflation, retail sales and housing starts has also weighed on the dollar, tempering expectations for higher interest rates.

"An inherently weaker dollar was seen because of the Trump rhetoric", said analyst Barnabas Gan at OCBC. This has led investors to question whether Trump can push through tax cuts and deregulation and fuelled demand for safe-haven assets including gold.

That was only the latest worry in a tumultuous week at the White House, which included allegations that the president tried to interfere with a federal investigation and shared classified information with Russia's foreign minister. "What is more, it exceeded the technically important 200-day moving average yesterday, which lent it additional buoyancy".

"The rise in gold is largely a dollar play, with the dollar weakening because of Trump", said Barnabas Gan, an economist at Oversea-Chinese Banking Corp., who also flagged overseas tensions. The dollar has fallen to its lowest level since November 2016, so it is no surprise that gold has benefited from this weakness in "King Dollar".

Meanwhile, data from the U.S. Department of Labor, also released on Thursday, said initial jobless claims fell by 4,000 to 232,000 in the week ending May 13.

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

Among other precious metals, silver rose 0.6% at $16.69 an ounce.

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

If gold can hold above that level it could rise to its long-term downtrend line at $1,287 an ounce, said technical analysts at Commerzbank.

  • Zachary Reyes