Gold rises as investors await Trump’s choice of Fed chair – CNBC

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Gold prices inched up on Thursday, helped by a weaker dollar as investors waited for the nomination of a new U.S. Federal Reserve chair and the unveiling of U.S. tax reform legislation later in the day.

A decision by the U.S. Fed on Wednesday to leave interest rates unchanged pushed the dollar lower, helping lift dollar-denominated gold by making it cheaper for holders of other currencies.

“The slightly weaker dollar is the main explanation (for gold’s rise),” said Julius Baer analyst Carsten Menke.

Spot gold was up 0.09 percent at $1,275.91 an ounce at 8:35 a.m. ET after touching $1,281.43, the highest since Oct. 26. U.S. gold futures fell 0.1 percent at $1,276 an ounce.

Investor focus was moving to the choice of the next Fed chair, said Menke.

U.S. President Donald Trump is expected on Thursday to nominate Fed Governor Jerome Powell to replace Janet Yellen as leader of the central bank. Powell is seen as less likely to push for rapid interest rate rises than other candidates.

Gold is sensitive to rising interest rates because they push up bond yields, making non-yielding gold less attractive, and tend to boost the dollar.

“If he (Trump) were to pick Fed Governor Powell as expected, gold would likely make slight gains,” said analysts at Commerzbank.

But Menke predicted prices could fall to $1,200 by the end of the year. “We think further rate rises are on the cards, which should support the U.S. dollar and yields,” he said.

Markets are pricing a 97 percent likelihood of a rate increase in December, according the CME Fedwatch tool, but are less certain of the pace of rises next year.

That pace could be accelerated if tax reform legislation to be unveiled by Republicans in the House of Representatives on Thursday were enacted and succeeded in speeding economic growth.

On the technical side, gold was struggling to break above its 100-day moving average at $1,275.60 and indicators suggested prices will fall, analysts said.

“Gold continues to weigh on the downside and still implies a test of the current October low and the 200-day moving average at $1,260.55/$1,260.89,” said Commerzbank technical analysts.

“Between here and the $1,250 2017 uptrend we should see the market attempt to stabilize,” they said in a note.

In other precious metals, silver was down 0.2 percent to $17.09 an ounce.

Platinum was down 0.2 percent to $929 an ounce and palladium was 0.35 percent lower at $998 an ounce.