By Zandi Shabalala
LONDON (Reuters) - The price of gold rose on Tuesday due to a weaker dollar and as financial markets wait to hear what U.S. President Donald Trump has to say about his policies on tax reforms and government spending when he delivers a key speech to Congress this evening.
Gold is often seen as an alternative investment during times of geopolitical and financial uncertainty along with other "safe-haven" assets such as the Japanese yen and U.S. Treasuries.
Spot gold was up 0.4 percent ao $1,257.19 an ounce by 1535 GMT, near the previous session's 3-1/2 month high of $1,263.80.
U.S. gold futures were steady at $1,258.70.
The dollar index, in which gold is priced, was down 0.3 percent further boosting the precious metal.
Investors are shifting their attention to Trump's policy speech to a joint session of Congress on Tuesday night, when he is expected to provide clues on his tax-cutting plans.
"There is elevated uncertainty ahead of the (Trump) speech. It's clear that there is a lot of doubt expressed about how much Trump's policies are going to be pro-growth and pro-inflation," ETF Securities analyst Nitesh Shah said.
The president had already said on Monday that he would propose a budget that would increase spending on defence while seeking savings elsewhere.
"After yesterday's news about an increase in military spending it will be even more complicated to keep the budget in check," said Commerzbank commodity analyst Carsten Fritsch, adding that expectations for tax cuts had also been raised.
"A massively increased budget deficit would undermine confidence in the dollar and benefit gold."
INTL FCStone analyst Edward Meir said in a note that any price movement following Trump's speech was likely to be short-lived because "many of the proposals need to translated into actual legislation and also need congressional approval".
But some upside could be on the cards for gold this week, Meir said, if U.S. Federal Reserve chair Janet Yellen suggests in her testimony on Friday that the central bank is likely to hold off from an interest rate move in March.
A delay in a Fed rate hike would be positive for non-interest bearing bullion while also pressuring the dollar, making dollar-denominated gold more appealing to buyers with other currencies.
However, there are still some Fed officials pushing for a rate increases as soon as next month.
Spot silver rose 1 percent to $18.44 an ounce, in sight of the 3-1/2-week high of $18.48 set in the previous session.
Platinum shed 0.6 percent at $1,034.60 after scaling a five-month high on Monday at $1,044.10. Palladium fell 0.5 percent to $777.
(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Jason Neely, Greg Mahlich)
Disclaimer: No Business Standard Journalist was involved in creation of this content
