Gold prices jumped to a one-month high on Wednesday, benefiting from resurgent safe haven demand and a weakening dollar as investors awaited the results of the US midterm elections.
Bullion prices shot up this week as some uncertainty over the results of the US midterm elections drove safe haven buying into the yellow metal. While markets are broadly expecting a mixed result, a clear-cut majority for the incumbent Democrats or re-elected Republicans could herald changes in monetary and fiscal policy.
Spot gold traded above $1,700 for the first time since early-October, rising to $1,712.62 an ounce by 18:44 ET (23:44 GMT), while gold futures edged up to $1,715.90 an ounce. Both instruments jumped over 2% in late trade on Tuesday.
Speculation over a smaller interest rate hike by the Federal Reserve in December also weighed on the dollar, after several Fed officials said they supported such a move. Weakness in the dollar, which slipped to an over 1-½ month low this week, greatly aided a rally in metal markets. The dollar index traded down 0.5% at 109.61 early-Wednesday. US Treasury yields also tumbled over 2%.
The dollar also saw some profit taking, as investors locked in gains from a stellar rally by the greenback this year.
CPI inflation data due on Thursday is expected to shine more light on this front and is widely expected to show inflation remained stubbornly high in October, which could see the Fed position for a bigger rate hike.
© Reuters.
