Gold hits one-month high after Trump doubts knock dollar and shares

By Jan Harvey

LONDON (Reuters) - Gold rallied more than 1 percent on Monday after U.S. President Donald Trump's failure to push through a healthcare reform package on Friday raised questions over his ability to deliver promised tax cuts and spending plans.

That knocked the dollar to a four-month low versus a basket of currencies and drove a drop in stock markets, with European indices sliding nearly 1 percent in early trade and U.S. stocks opening lower. [MKTS/GLOB]

Spot gold was up 1.2 percent at $1,259.11 an ounce by 1350 GMT, having touched a one-month high of $1,261.03. U.S. gold futures for April delivery were up $10.70 at $1,259.20.

"This is entirely driven by the weaker U.S. dollar," Commerzbank analyst Carsten Fritsch said. "The euro is at the highest level versus the greenback since immediately after the U.S. election. The Trumpflation trade is being priced out after the failure to repeal Obamacare."

Gold had already rallied sharply from its March 15 low after a less hawkish policy statement than expected from the Federal Reserve, which dampened expectations for near-term increases in U.S. interest rates.

Gold is highly sensitive to rising U.S. rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

The metal ran into resistance in earlier trade at its 200-day moving average, now at $1,259 an ounce. The 200-day average also halted last month's sharp price rally. A close above that threshold could trigger follow-through buying, analysts said.

"While the bull camp is back in control of the gold market, it may be difficult to re-test the 2017 high above $1,261 unless risk-aversion continues to grow," futures analysis and forecasting specialist Hightower said in a report on Monday.

The world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, reported an outflow of 1.8 tonnes on Friday. [GOL/ETF]

U.S. Commodity Futures Trading Commission data showed on Friday, however, that hedge funds and money managers boosted their net long positions in COMEX gold in the week to March 21 after two weeks of cuts.

China's net gold imports via main conduit Hong Kong rose 50.8 percent month on month in February to 47.931 tonnes, data showed.

Silver was up 1.9 percent at $18.08 an ounce, off an earlier three-week high of $18.124, while platinum gained 1.8 percent to $977.80. Palladium was down 0.7 percent at $803.65 after hitting a two-year peak of $815.40 on Friday.

(Additional reporting By Nallur Sethuraman in Bengaluru; Editing by Susan Thomas and David Goodman)