Gold Price Hits Two-week High on Trump Uncertainty

The yellow metal rose to $1,259 on Wednesday, its highest price since May 1.

trump-uncertainty

Gold was on track for its biggest rise since last June on Wednesday (May 17) after concerns about the Trump administration pushed investors to safe-haven assets.

Spot gold was up 1.8 percent, at $1,258.78 an ounce, as of 1:30 p.m. EST on Wednesday. Earlier in the day it hit $1,259, its highest price since May 1.

On Tuesday (May 16), The New York Times reported on the contents of a memo written by former FBI Director James Comey; in it, Comey alleges that Trump asked him to drop an investigation of former National Security Adviser Michael Flynn. The memo is being cited as evidence of obstruction of justice from Trump.

Trump “perhaps is facing his toughest time in the office,” said Naeem Aslam, chief market analyst in London at Think Markets UK. Investors are now questioning whether there is “any possibility of impeachment becoming a reality, because certainly that would hit the confidence massively.”

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“Safe haven assets have caught a bid as markets have become increasingly concerned by the maverick actions of Donald Trump,” said Richard Perry, a Hantec Markets analyst, in a note. “This has got commentators making comparisons to Nixon’s Watergate scandal, and markets are responding.”

The White House has denied the allegations spurred by the memo, but has been under pressure since Trump fired Comey last week. Monday (May 15) media reports revealing that Trump has discussed sensitive national security information with Russia’s foreign minister have only increased that pressure.

Worries about Trump’s ability to push legislation through Congress are also surging. The problems his administration is currently facing are seen as drawing focus away from policies to aid growth.

“Back-to-back salacious stories in the Washington Post and New York Times on President [Donald] Trump has the potential to sidetrack Trump’s growth agenda,” Michael Armbruster, principal and co-founder at Altavest, told MarketWatch. “This is negative for the US dollar on several levels, and is bullish for gold.”

Trump’s presidency crisis is also drawing into question whether the US Federal Reserve will really hike interest rates next month. Many investors doubt the US economy will be strong enough for the committee to raise rates two more times this year as expected.

“The [odds for a] June hike went from 80 percent to around 70 percent,” said Aaron Kohli, director of fixed-income strategy at BMO Capital Markets. He added that based on Fed funds futures, the odds for a second rate hike by December have fallen in the last several days to 37 percent from 65 percent.

If the Fed decides to keep rates steady that could be positive for gold, as the yellow metal tends to fare better when interest rates are low and often struggles when interest rates are higher.

Don’t forget to follow us @INN_Resource for real-time news updates.

Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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