Funds flowed into gold on Wednesday, while the dollar tanked amid fresh political uncertainty triggered by US President Donald Trump’s son emails and meeting last summer with a Kremlin-linked lawyer that promised “sensitive information” to “incriminate” Democratic presidential nominee Hillary Clinton.
The news came amid an ongoing investigation by the Justice Department and the House and Senate Intelligence Committees on whether President Trump’s team assisted Moscow in influencing last year’s election, which it has already been determined Russia did.
Gold spiked in Asian hours Wednesday, trading as high as $1,220.35 an ounce compared with a low of under $1,208 hit on Tuesday. The metal was slightly higher in early US trading, with August Comex gold last up $1.90 an ounce to $1,216.60.
US currency also suffered and the dollar index, which measures the greenback against a basket of currencies, fell as low as 95.592 in Asia trade on Wednesday, from levels as high as 96.174 on Tuesday. It went even lower in New York, modestly down (-0.10%) to 95.56 at 08:57AM ET.
Bullion has been trading around four month lows in the past weeks as the market has been gearing up to hear over today’s remarks from Fed Chair Janet Yellen before the US Congress.
Her remarks, delivered ahead of an appearance before the House Financial Services Committee, suggest the US is strong enough to afford more rate hikes, which pushed gold even higher. As of 9:23AM ET, it was $7.60 higher to $1,222.30 an ounce, while the dollar index recovered some of the lost ground , climbing 0.05% to 95.72 at 12:56PM ET.
The gold price has an inverse correlation to interest rates as the metal is not income producing and investors have to rely on price appreciation for returns. Higher interest rates also boost the dollar, which usually move in the opposite direction of the gold price.