Gold price can't hold onto $1,200

Gold advanced to a seven-week high on Thursday as the Donald Trump-inspired rally in equities begin to lose steam and  the US dollar comes under renewed pressure.

Gold for delivery in February, the most active contract on the Comex market, hit a high of $1,207.20 an ounce in overnight trade, up nearly 1% from Wednesday's close and the highest on an intra-day basis since November 23. The metal paired those gains in afternoon trading in another day of huge volumes in New York dipping below the psychologically important $1,200 an ounce level.

Gold is now up  nearly 5% year to date, while the Dow Jones blue chip index has managed less than half a percentage point gain in 2017

Gold is up more than $80 an ounce since hitting post-US election lows mid-December, but remains down some $130 from an initial but brief surge on election night as results showed a likely victory for Trump.

Gold bears have been making big bets that a Trump administration will lead to strong US economic expansion, higher interest rates and a stronger dollar. Higher interest rates boosts the value of the dollar and makes gold less attractive as an investment because the metal is not yield-producing and investors have to rely on price appreciation for returns.

But rising uncertainty about the impact of the president-elect's fiscal stimulus plans has seen the dollar take a beating this week and US stock markets retreat from their highs.

Gold is now up  nearly 5% year to date, while the Dow Jones blue chip index has managed less than half a percentage point gain in 2017 and the S&P 500 index hasn't fared much better. The Nasdaq has been setting records this year, but gold has also outperformed the tech-laden index.

Gold has a habit of starting off well in a new year with a recent note from ABN Amro  showing that since 2000 gold prices rose in January nearly two-thirds of the time. Moreover, the positive starts to the year happened regardless of whether the year before had ended on a positive or a negative note.

Gold price

Source: ABN Amro

The Dutch bank does not believe gold's momentum in the new year will hold however:

The gold market is now more focussed on inflation. Higher-than-expected US inflation numbers will probably support gold prices.  However, if US data (excluding inflation data) continue to come in strongly as we expect, this positive short-term momentum is likely to fade.

 

Gold mining stocks in cautious advance

Reaction by investors to gold's potentially fourth day in a row of gains was subdued with top gold mining stocks making relatively modest gains on Thursday.

Shares of top gold miners Toronto's Barrick Gold and Denver-based Newmont Mining enjoyed 2% and 1% gains on the day. Vancouver's Goldcorp advanced 1.4%, while further down the rankings trading was  mixed with Canada's Iamgold advancing 1.8% and Novagold adding 1.4% while Yamana Gold and Eldorado Gold trended weaker.

ADRs of world number three gold mining company in terms of output Anglogold Ashanti jumped 5.4% while fellow South Africa-based miner Sibanye Gold added 2,8% – the volatile counters are also the top performers year to date with over 14% gains.