Gold futures extend its rally on Monday as investors are seeking a safer asset amid the uncertainties about President Donald Trump’s fiscal stimulus policies.
Gold futures for April delivery climbed 0.9 percent to $1,231.80 an ounce at 12:37 p.m. on the Comex in New York. The metal rose 2.5 percent last week as a weaker U.S. wage growth reducing the odds of Federal Reserve boosting interest rates this year.
The rising political risk in the U.S. is also a factor that drives the demand of gold, which is considered as safe-haven asset in times of geopolitical and financial turmoil. In trump’s first two weeks in office, he formally ended the Trans-Pacific Partnership trade deal, committed to build a Mexican border wall and signed an executive order about immigration ban on seven Muslim-majority countries.
“The amount of political risk being created by this new U.S. president and administration is going to create an enormous amount of international tension and uncertainty, and will probably result in a trade war at least with China and possibly other areas,” Independent Strategy Ltd.’s David Roche said by phone from Hong Kong with Bloomberg. “I want to see what this administration, what sort of mistakes they’re going to make.”
Roche also cited that expectation for higher inflation is another reason to buy gold. Trump’s fiscal stimulus policies, including tax cut and infrastructure investment, are expected to increase inflation.