Gold sparkles on haven trade

Listen to this article

00:00
00:00

Another quick shot in the arm for gold.

The precious metal advanced 1.4 per cent on Tuesday to $1,271.01 a troy ounce as the US dollar slipped and as geopolitics continued to drive jitters drumming up demand for haven assets.

The dollar index, a measure of the buck against a basket of peers, slid 0.2 per cent and was down for the second straight day helping lift sentiment on gold. Weakness in the greenback, the currency in which gold is denominated, makes the yellow metal cheaper to foreign buyers.

Moreover, concerns about geopolitics helped revive the so-called fear trade with investors seeking the safety of the haven asset. Investors continue to keep an eye on the upcoming French elections and watch the US stance towards Russia and North Korea.

US-Russia ties have grown increasingly strained since the US launched airstrikes on a Syrian airbase that was the launchpad of a suspected gas attack. Russia criticised the US response and on Tuesday, US Secretary of State Rex Tillerson urged Moscow to realign itself with the US. Moreover, US president Donald Trump reiterated today that the US is prepared to act unilaterally against North Korea, with or without China’s support.

Moreover, in her remarks on Monday Federal Reserve chair Janet Yellen indicated that rate rises by the Federal Reserve will be gradual. Higher rates are a drag on gold, which offers no yield, and her remarks are also said to have helped shore up sentiment on the precious metal.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.