Gold closed higher on Monday, December 18, as uncertainty over U.S. tax reform weighed on the dollar, while an analyst said bullion may face renewed headwinds early next year.
The dollar dipped against a basket of major currencies on Monday amid caution ahead of a vote in U.S. Congress on tax reform, making dollar-denominated bullion cheaper for buyers using other currencies.
“If the whole thing (tax reform) falls apart at the last minute, it would be hugely positive for gold, but I think that is unlikely,” said analyst Carsten Menke at Julius Baer in Zurich.
If the tax bill passes, gold might dip slightly, but that scenario is largely priced in the market, he added. Top U.S. Republicans said they expected Congress to pass a tax code overhaul this week, with a Senate vote as early as Tuesday.
Expectations that tax cuts would spur economic growth and prompt faster interest rate rises in the United States have boosted the dollar and weighed on gold.
Spot gold was up 0.4 percent at $1,259.78 an ounce by 1330 GMT, while U.S. gold futures rose 0.4 percent to
$1,262.60 an ounce.
Looking to 2018, Menke expects a final bout of dollar strength to hit gold, sending prices down $25-$50, but then gold should recover.
Hedge funds and money managers cut their net long positions in COMEX gold contracts in the week to Dec. 12, while they switched to a net short stance in silver for the first time in five months, data showed on Friday.
Silver , which was unchanged at $16.05 an ounce, has shed about 10 percent over the last four weeks after touching a peak on Nov. 17.
Palladium fell 0.9 percent to $1,014.22 an ounce and platinum rose 1.1 percent to $903.15 an ounce after
touching $904.90, its highest since Dec. 6.
