Gold hit a two-week high on Wednesday as Asian stocks slipped and the dollar fell amid political uncertainty after a source said U.S. President Donald Trump asked the FBI to end a probe into his former security adviser.
Spot gold climbed 0.6 percent to $1,243.31 per ounce by 0746 GMT, after earlier touching its strongest since May 3 at $1,244.70. Gold has risen for five days straight. U.S. gold futures were up 0.6 percent at $1,243.50 per ounce.
Trump asked his now-dismissed Federal Bureau of Investigation (FBI) Director James Comey to end a probe into ties between former national security adviser Michael Flynn and Russia, according to a source who has seen a memo written by Comey. The memo raises questions about whether Trump tried to interfere with a federal investigation. The White House denied the report.
“An inherently weaker dollar was seen because of the Trump rhetoric,” said analyst Barnabas Gan at OCBC. “Safe-haven demand because of Trump and geopolitical tensions, especially arising out of North Korea’s missile test, is lifting gold prices.”
“People could be looking for a short-term support at $1,240 levels,” he added. Distractions at the White House lower the chances of the administration enacting a legislation that is important to markets, namely tax and regulatory relief as well as infrastructure spending, said INTL FC Stone analyst Edward Meir.
“A lack of progress on these issues should theoretically contribute to the Fed holding a more dovish course for longer, hurting the dollar and possibly equities in the longer term, but likely proving beneficial for gold,” he said.
The U.S. Federal Reserve is still likely to raise interest rates next month, with futures traders pricing in a 74 percent chance of a hike.
Spot gold faces a resistance at $1,245 per ounce and may temporarily hover below this level or retrace to a support at $1,237.26 before retesting this barrier, according to Reuters technical analyst Wang Tao.