Gold prices rose early on Thursday, helped by a weaker dollar and lower US bond yields, as investors waited for the nomination of a new US Federal Reserve chair who could influence the pace of interest rate rises. The dollar fell and US 10-year Treasury yields slid to two-week lows after Republicans in the House of Representatives published tax cut proposals that investors judged were unlikely to become law.
Lower bond yields make gold, which offers no yield, more attractive to investors while a weaker dollar makes bullion cheaper for holders of other currencies. Spot gold was up 0.3 percent at $1,277.63 an ounce at 1535 GMT after touching $1,284.10, the highest since Oct. 20. US gold futures were 0.2 percent higher at $1,279.20 an ounce.
Investors were focused on the choice of the next Fed chair, said James Butterfill, head of investment strategy at ETF Securities. US President Donald Trump was expected on Thursday to nominate Fed Governor Jerome Powell to replace Janet Yellen as leader of the central bank. Gold is sensitive to rising interest rates because they push up bond yields and tend to boost the dollar.
But gold was likely to fall to $1,200 by the end of the year because even a modest number of rate rises would support the dollar and bond yields, said Julius Baer analyst Carsten Menke. Markets are pricing a 97 percent likelihood of a rate increase in December, according the CME Fedwatch tool, and the pace of subsequent rises could be faster if Republican tax reform were enacted and succeeded in speeding economic growth.
On the technical side, gold rose above its 100-day moving average at $1,275.62 but indicators suggested prices would 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. In other precious metals, silver was down 0.2 percent at $17.09 an ounce. Platinum was down 0.4 percent to $927.50 an ounce and palladium was 0.9 percent lower at $992.60.