Gold settles at a 5-month high as investors focus on geopolitics

Gold prices rallied on Tuesday to settle at their highest levels in about five months as investors grew jittery over the impending French presidential election as well as U.S. relations with Russia and North Korea.

June gold GCM7, +0.24% gained $20.30, or 1.6%, to settle at $1,274.20 an ounce. The settlement was the highest since early November, FactSet data show. Prices are also ended above their 200-day moving average of $1,260.65, suggesting positive momentum building in the yellow metal.

The market has been shaken by the French presidential elections ahead of first-round voting on April 23. The probability is growing that far-right anti-euro candidate Marine Le Pen could face leftist candidate Jean-Luc Mélenchon in the second round on May 7. It is feared that both candidates could lead to the destabilization of the European Union and the euro EURUSD, -0.0189%

Growing tensions in Asia centered on North Korea’s recent missile tests and the Middle East, where the U.S. launched a pinprick airstrike in Syria late Thursday and has hinted at the potential for more actions, have investors on edge, a factor supportive to gold prices rising.

“Geopolitical risk in the past few years have not affected gold prices in a sustained way,” said Chintan Karnani, chief market analyst at Insignia Consultants. However, under U.S. President Donald Trump, “it is different.”

“The uncertainty of Trump’s action or inaction has partly supported gold prices,” he said, adding that last week’s U.S. airstrike on Syria was unexpected and there’s still “controversy” surrounding a possible connection between Russia and Trump and his administration.

Meanwhile, Federal Reserve Chairwoman Janet Yellen, at a question-and-answer session at the University of Michigan late Monday, said the central bank has ceased trying to stimulate the U.S. economy and is instead allowing it “to kind of coast and remain on an even keel.”

“For gold, this is positive as it takes from the robust attitude to the economy that markets factored in after the election of President [Donald] Trump,” wrote Julian Phillips, contributor and a founder of GoldForecaster.com in a Tuesday research note.

Precious metals are benefiting from a dollar that has softened somewhat and government bonds yields trading near the low end of their recent range. As measured by the ICE U.S. Dollar Index DXY, +0.01% the buck was off 0.3% on Tuesday, while the 10-year benchmark Treasury yield TMUBMUSD10Y, -0.50% was at 2.30%.

A weaker dollar makes commodities priced in the metal more attractive to buyers using other currencies and lower yields can lift the appeal of purchasing gold—which doesn’t offer a yield—over owning government paper.

Among other metals, May silver SIK7, +0.53% jumped 33.9 cents, or 1.9%, at $18.254 an ounce, while May copper HGK7, -0.29% added less than half a penny to $2.608 a pound. July platinum PLN7, -0.09%  added $27.90, or 3%, at $967.30 an ounce and June palladium PAM7, -0.01% rose $13.10, or 1.7%, at $803.10 an ounce.

In exchange-traded funds, the SPDR Gold Trust GLD, +1.45% gained 1.5%, the VanEck Vectors Gold Miners ETF GDX, +3.00%  rose 3.2%, while the iShares Silver Trust SLV, +1.82%  rose 1.8%.

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