Gold prices hit four-month high
January 15, 2018 | 4:24 PM
by Reuters
Spot gold was up 0.3 per cent at $1,342.11 an ounce by 1045GMT after touching its strongest since Sept. 8 at $1,344.44. - Reuters file picture

London: Gold prices hit a four-month peak on Monday as the US dollar index slumped to its lowest in three years but analysts warned the greenback's decline could be short-lived as it was not driven by fundamentals.

Spot gold was up 0.3 per cent at $1,342.11 an ounce by 1045GMT after touching its strongest since Sept. 8 at $1,344.44. The precious metal rose for a fifth straight week last week, gaining 1.4 per cent.

US gold futures were up 0.6 per cent at $1,343.20 an ounce.

"The weakness in the dollar is not justified by fundamentals. It's a little bit weird considering the divergence in monetary policy should play in favour of a stronger dollar," Capital Economics analyst Simona Gambarini said.

She said the US Federal Reserve is widely expected to raise interest rates, which would favour a stronger dollar, while the European Central Bank should keep rates on hold.

The dollar index was down 0.2 per cent at 90.474, having reached its weakest since January 2015 at 90.421.

A lower greenback makes dollar-denominated assets such as gold cheaper for holders of other currencies, while higher rates could dent demand for non-interest-paying gold.

"The main reason for the tight relationship between the dollar and gold is a lack of physical demand on the gold side in terms of ETFs (exchange-traded funds) and Indian and Chinese jewellery," said Carsten Menke, a Julius Baer commodity analyst.

Adding a touch of bullishness to gold was data from the US Commodity Futures Trading Commission on Friday, which showed that hedge funds and money managers raised their net long positions in Comex gold and silver in the week to Jan. 9.

Iran's president said on Sunday the United States had failed to undermine a nuclear deal between Tehran and major powers, and hailed the accord as a "long-lasting victory" for Iran, state television reported.

US President Donald Trump on Friday delivered an ultimatum to European signatories of the deal to fix the "terrible flaws" of the agreement with Iran, or the United States would pull out.

Palladium rose 1 per cent to $1,135 on Monday, after hitting a record high of $1,138.

The metal has seen a sustained rally from high demand in the auto industry amid a supply deficit, analysts said.

Spot silver rose 0.6 per cent to $17.35 an ounce, after touching a near three-month high at $17.42. Platinum was up 0.3 per cent at $996.95, after touching its highest since Sept. 11 at $1,001.40.

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