Gold, silver and platinum rallied to one-month highs on Tuesday as concerns over the outcome of the US election sparked losses in stocks and the dollar, prompting investors to seek out precious metals as a haven from risk. The announcement of an FBI investigation into Hillary Clinton's use of a private email server during her time as Secretary of State helped send the VIX, the so-called fear index of market volatility, to its highest in seven weeks, fuelling widespread risk aversion.
Fresh opinion polls showed Democrat Clinton's lead over Republican Donald Trump has narrowed slightly since early last week. Spot gold hit its highest since early October at $1,291.34 an ounce and was up 1.1 percent at $1,290.92 by 3:05 pm EDT (1905 GMT). US gold futures for December delivery settled up 1.2 percent at $1,288.
"The Trump risk seems to be back in the market at least to some extent," Commerzbank analyst Carsten Fritsch said. A Trump win would likely boost gold due to uncertainty over US economic and foreign policy, HSBC said in a research note. "The market is reacting to the weaker dollar and general financial uncertainty across the board," said James Steel, chief metals analyst for HSBC Securities in New York. "We have some movement out of risk and into bullion," he said.
The dollar fell 0.8 percent against a basket of major currencies and stocks were on the back foot going into the final days of a fractious US presidential campaign. Silver was up 2.9 percent at $18.38 an ounce, having peaked at $18.49, while platinum was up 1.5 percent at $991.50, off an earlier one-month high of $997. Palladium was up 2.4 percent at $633.50. The two-day Federal Open Market Committee meeting began on Tuesday and will also be closely monitored for clues on the timing of a possible US interest rate hike.
Gold is highly sensitive to rising US interest rates as higher borrowing costs increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced. Markets were pricing in around a 78 percent chance the Fed will raise rates in December, but just a 6 percent chance of a hike this week, according to the CME Group's FedWatch Tool. With the prospect of a Fed rate hike explicitly tied to the strength of the US economy, traders are also keenly awaiting the release of US non-farm payrolls data for October early on Friday.
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