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Gold higher as dollar nicked by economic agenda uncertainty
« on: August 23, 2017, 02:41:30 PM »

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Gold prices recovered Wednesday, aiming for a return to the nearly three-month high hit to start the week, as a wobbly dollar supported the yellow metal.

Gold for December delivery GCZ7, +0.28%  rose $2.40, or 0.3%, to $1,294.20 an ounce. The greenback, as measured by the ICE U.S. Dollar Index DXY, -0.18% fell 0.2%. A weaker U.S. currency tends to boost dollar-denominated gold prices.

Gold futures settled at $1,296.70 on Monday—the highest settlement since early June. Last week, the contract briefly jumped above $1,300 for the first time this year, in part as concerns about President Donald Trump’s pro-business agenda helped to spark a rush to haven assets including gold. That returned as a market theme on Wednesday.

The dollar initially gained and gold remained pinned in a narrow range in the wake of a Politico report Tuesday that Trump’s top aides and congressional leaders were making progress on a tax-reform plan that financial markets believe could boost economic growth. But that momentum appeared to slow following Trump’s rally with supporters in Arizona Tuesday night, during which he said he’s ready to shut down the government to win funding for a border wall with Mexico. Trump also warned of the possible termination of the North American Free Trade Agreement.

Traders and investors showed caution ahead of the Federal Reserve’s three-day Jackson Hole, Wyo., symposium of global central bankers beginning Thursday. Financial markets will be looking for hints from central bankers on any changes to monetary policy, especially in marquee speeches from the Fed’s Janet Yellen and the ECB’s Mario Draghi on Friday.

“Buoyant asset prices and low unemployment will likely triumph over the lagging inflation conundrum. With the bank’s backs pressed against the wall and hands tightly tied, members are left little choice but to raise interest rates and start to reduce swollen balance sheets,” said Adrienne Murphy, chief market analyst with AvaTrade, in a note.

“Investors are looking for a gradual and collective step towards the end of quantitative easing. If central bankers deliver on a cohesive recognition of winding down quantitative easing—most importantly the ECB and the Fed—we should see a rise in bond yields and an injection of market volatility,” she said.

Higher rates tend to boost the dollar, cutting demand for gold investors using other currencies. Higher rates also boost the appeal of investments that offer a yield, which gold does not.

Ahead of the conference, Wednesday’s economic lineup includes manufacturing and services purchasing managers’ indexes, or PMIs, for August, due for release at 9:45 a.m. Eastern. New homes sales for July are on the docket at 10 a.m. And, Dallas Fed President Robert Kaplan will speak at an energy conference at 1:05 p.m. Eastern.