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Gold Touches Two-Week High amid Sliding US Dollar

March 20, 2017 at 17:04 by Andrew Moran

Gold prices are touching two-week highs as the US dollar slid to a six-week low amid US President Donald Trump‘s protectionist proposals. The yellow metal has been steadily climbing ever since the Federal Reserve announced that it would be raising interest rates for the second time in three months.

April gold futures rose $2.60, or 0.21%, to $1,232.80 per ounce at 16:33 GMT on Monday. This comes as gold experienced its best week last week since the beginning of February. The yellow metal recorded a weekly gain of 2.4% thanks to a dovish US central bank.

Silver is trading relatively flat to kick off the trading week. May silver futures jumped $0.01, or 0.07%, to $17.42 an ounce. Silver also posted its best weekly gain in a month last week as it surged 2.6%.

This week, the G20 held its summit, which was dominated by the US administration’s protectionist stance on international trade. The concerns over President Trump’s trade policies prompted the greenback to slump to a six-week low and dip 0.1% on Monday. A tumbling dollar raises the purchasing power of foreign investors who want to buy commodities like gold and silver.

Experts believe that this kind of talk is minimizing investors’ confidence in currencies, something that would be a boon for precious metals.

Gold was further supported by the present state of geopolitical affairs. British Prime Minister Theresa May will trigger the official Brexit process on March 29. Some of the markets were also keeping a close eye on France, where the populist momentum is gaining strength as the National Front’s Marine Le Pen continues to make gains in the polls.

Meanwhile, the US central bank’s statement last week is still disappointing investors. The Federal Open Market Committee (FOMC) did not confirm it would be accelerating the pace of monetary tightening. The Fed has said that it will likely raise rates two more times this year, but the extent of those rate hikes are expected to be minuscule. Gold is sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors into yield-bearing assets.

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