Gold steady as investors adopt cautious tone ahead of French elections
London — Gold prices treaded water on Friday as investors awaited the outcome of weekend French elections and possible announcements about tax cuts in the US.
Spot gold was up 0.1% at $1,282.59/oz at 10.50am GMT, on track for its first weekly drop in six. US gold futures also added 0.1% to $1,284.40.
"The big news over the weekend will be the French election and the market will be to an extent on hold ahead of that," said Mitsubishi commodities analyst Jonathan Butler.
There was the potential for safe-haven buying of gold after France said its security forces were fully mobilised for a presidential election at the weekend after the killing of a policeman by an Islamist militant.
"Into the near term, if the geopolitical tensions intensify, there is a chance that gold prices will reach $1,300 or more," OCBC analyst Barnabas Gan said.
Moving above $1,290/oz-$1,291/oz would be significant as it would break above a downtrend that had been in place since gold touched a record high of $1,920.30 in 2011, Butler said. Investors would keep a close eye on events in the US, he added.
"Over next week or so, I think we’ll start to see whether the reflation trade is back on, which might be backed up by some announcements from the US administration on tax reform."
The Trump administration would announce a tax reform plan soon and expected it would be approved by Congress in 2017 whether a healthcare overhaul happened or not, Treasury Secretary Steven Mnuchin said on Thursday.
Gold was at risk of some profit-taking after its strong recent run, but should be supported by other factors, analysts said.
"Gold struggled to hold this week’s gains as the dollar strengthened and concerns over global risk eased. However, selling was relatively muted, which suggests a period of consolidation is now upon us," ANZ analysts wrote in a note.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), said its holdings fell 0.76% to 854.25 tonnes on Thursday. The outflows follow a 11.8-tonne increase on Wednesday, the biggest one-day inflow since September.
Spot silver declined 0.2% to $17.96, extending losses into the fifth session. Silver has shed about 3% so far this week.
Platinum slipped 0.1% to $976.50, while palladium was flat at $800 after rising more than 3% in the previous session.