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Gold Dips on Trump Tax Pledge, Climbing US Dollar

February 10, 2017 at 18:12 by Andrew Moran

Gold futures are ending the trading week in negative territory. Following a pledge made by US President Donald Trump to make a tax announcement soon, which helped the US dollar climb and increase expectations that the Federal Reserve will move ahead with raising interest rates, gold prices dipped, but it will still finish with a weekly gain.

April gold futures tumbled $1.40, or 0.11%, to $1,235.40 per ounce at 16:42 GMT on Friday. Despite the back-to-back losses, gold will record a 1.2% weekly gain. The yellow metal snapped a five-session winning streak on Thursday after prices reached their highest levels in 13 weeks.

Silver, meanwhile, is rallying to finish the trading week. March silver futures rose $0.23, or 1.30%, to $17.97 per ounce. Silver will also post a weekly gain of 2.8%.

Both gold and silver are starting off 2017 on a high note. Gold has soared roughly 7% year-to-date, while silver has risen more than 6%. Demand for gold among investors has also been surging in recent weeks as the level of political uncertainty in both the US and Europe continues to grow.

The yellow metal is sputtering on Friday because of reports that the US president will make a major tax announcement. Many expect that President Trump will outline a series of across-the-board tax cuts, and White House officials note that they will not be for the rich.

Reports helped fuel gains in the US dollar as it advanced 0.2%. The greenback has shed approximately 3% in 2017 due to the new administration implementing a weak dollar policy, a reversal from the 1990s when the US government adopted a strong dollar policy. A higher dollar makes commodities like gold and silver more expensive for foreign investors to purchase.

Meanwhile, traders are more confident that the US central bank will pull the trigger on a rate hike sooner rather than later, especially because of the latest positive economic data. It was reported that initial jobless claims had fallen last week to a 43-year low, a data point that was largely unexpected.

Gold is sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors into yield-bearing assets, like bonds and stocks.

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