LONDON: Gold prices fell on Monday towards the four-week lows hit last week as the dollar rose after US politicians approved a major tax overhaul and the market looked ahead to a meeting of the Federal Reserve later this month.

 

Spot gold was down 0.6 per cent at $1,273.04 an ounce, at 1237 GMT compared with last Thursday’s $1,270.11, its lowest level since Nov. 6. US gold futures fell 0.5 per cent to $1,275.80 an ounce. The US Senate narrowly approved a tax reform bill on Saturday, moving US President Donald Trump a big step closer to his goal of slashing taxes for businesses and the rich while offering everyday Americans a mixed bag of changes.

 

“Prospects for large US tax cuts are a negative for gold... What the Fed does will be very important,” said Quantitative Commodity Research consultant Peter Fertig.

 

“There is a negative influence coming from other commodities like oil, the dollar is stronger and risky assets are up.” Lower oil prices could mean subdued price pressures which is a negative for gold, often used as a hedge against inflation.

 

The dollar was boosted by expectations that tax cuts would boost growth, which could fuel inflation and reinforce the case for higher US interest rates when the US central bank meets on Dec. 12 and Dec. 13. However, on Friday two Federal Reserve policymakers urged caution in raising interest rates.

 

“The tax bill should be somewhat bearish for gold as it could place the Fed in a more aggressive rate posture given that it could contribute to a widening deficit and potentially raise inflation,” INTL FCStone analyst Edward Meir said in a note. But he said tax bill was not expected to have much impact on gold in the short term. On the technical front, strong support for gold is around $1,266 at the 200-day moving average, while resistance kicks in around $1,283 near the 21- and 55-day moving averages. Meanwhile silver slipped 0.8 per cent to $16.30 an ounce, platinum was 0.8 per cent lower at $930.3 an ounce and palladium lost 0.3 per cent to $1,017.25.

 

Meanwhile, the US dollar bounced to a two-week top on Monday and S&P futures jumped as traders marked the passage of a Senate tax bill over the weekend, a move that raises the risk of more aggressive rate hikes in the world’s largest economy.

 

Pointing to a firm start for European shares, FTSE futures were up 0.7 per cent.

 

Traders will be focusing their attention on a meeting scheduled for British Prime Minister Theresa May and EU Commission President Jean-Claude Juncker to work on a Brexit deal.

 

Asian shares started the week with a whimper.

 

The greenback jumped 0.7 percent to as far as 112.98 yen, the highest since Nov. 17 on expectations of faster US rate hikes as fiscal policy was set to be eased even while the US economy was running at or near full employment.

 

A US tax cut could also boost corporate profits and lead to a slew of share buy-backs. US stock markets have already rallied for months on hopes that Washington would provide significant tax cuts for corporations.

 

Agencies