Dollar Drops Against Major Peers, Gold Advances

Gold has rallied 5.8% so far in 2017, extending an 8.1% gain in 2016

The US dollar weakened against a basket of major global currencies after President-elect Donald Trump stated that its value is too high in part because China holds down its currency, as reported by Bloomberg on January 17th, 2017. Gold advanced with bonds after Trump said the US currency is already “too strong.” European equities retreated a second day before a speech by British Prime Minister Theresa May outlining details about the UK’s Brexit plans. May’s speech will focus on UK’s decision to pull out of the European Union’s single market for goods and services, while seeking a completely new trading relationship with the bloc.

Donald Trump’s unprecedented win to emerge as the US President-elect on November 09th, 2016, has resulted in political aftershocks in the global financial markets, much akin to the Brexit vote in June 2016. With Trump set to assume office on January 20th, 2017, the market is awaiting news on key policies to be unveiled by the new government that takes office. May’s speech is likely to throw up important indicators of the UK’s exit strategy and its trade policies going forward. These two themes are expected to remain the cornerstone for key market developments during this week and the next.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 peers, fell 0.9% on January 17th, 2017, and has lost about 1.4% since the end of 2016. The pound rose 0.7% to $1.2133, erasing an earlier decline. The euro climbed 0.6% to $1.066. The yen traded at 113.26 per dollar, up 0.8%. The currency has strengthened 3.2% over the last seven sessions.

The 10-year Treasuries yields dropped six basis points to 2.33%, after falling two basis points last week. European bonds rose, with the 10-year bond yield falling four basis points to 0.28%.

Gold continues winning streak

Under commodities, gold climbed 1.1% to $1,215.51 per ounce, extending its winning streak to seven days, the longest since November 2016. Spot gold prices are at the highest since November 22nd, 2016. Crude oil added 1.8% to $53.29 a barrel. The Bloomberg Commodity Index rose for a fifth day, heading to the highest close since July 01st, 2016.

Bullion prices have risen every day except one in 2017, with gold for immediate delivery rising 1.1% to $1,215.97 an ounce on January 17th, 2017. Prices are the highest in almost a month. Gold has rallied 5.8% so far in 2017, extending an 8.1% gain in 2016.

Bullion’s advance was supported by the retreating dollar, as well as signs of increased demand. Holdings in exchange-traded funds backed rose 2.5 metric tons to 1,771.7 tons on Friday, January 13th, 2017, the biggest jump since November 09th, 2016. The start of the year is usually a positive one for gold. In the past decade, the metal has risen every January in all but three years. Spot silver climbed 1.3% to $17.02 an ounce. Palladium and platinum both rose 0.8%.

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