Gold prices slipped on Monday as the dollar rose and equities climbed, but political and economic uncertainties in the United States and Europe are expected to provide support for now. The spot price was down one percent at $1,221.9 an ounce by 1453 GMT from last week's three-month high of $1,244.67. US gold futures were down one percent at $1,223.4.
The dollar hit a two-week high against the yen as investors focused again on the US reflation trade which dominated in the aftermath of Donald Trump's election as US President in November, but has stalled this year. A higher US currency makes dollar-denominated commodities more expensive for holders of other currencies, potentially subduing demand.
Investors bought equities, betting that Trump's tax reform plans will boost economic growth and corporate profits, but they are concerned by his protectionist ideas on trade. In Europe, national elections this year starting with the Netherlands at the end of March make the political outlook uncertain.
The first round of the presidential elections in France follows in April, with the possibility of a victory for Marine Le Pen of the National Front arousing much uncertainty. "Support for gold because of politics will hold this side of the French election," said Danske Bank analyst Jens Pederson. "Le Pen's comments on euro membership are very much on the radar. The UK vote to leave the EU and Trump's election were unexpected ... Investors will lean towards safe assets."
Le Pen has rattled investors by promising to take France out of the euro zone and to hold a referendum on EU membership "Global uncertainty from the US, Europe and on the Korean front will drive global prices high again," said Geofin Comtrade Ltd's head of research, Hareesh V.
North Korea said on Monday it had successfully test-fired a new type of medium- to long-range ballistic missile the previous day, claiming advances in a weapons programme it is pursuing in violation of UN resolutions. Strong demand for gold can be seen on COMEX, where speculators raised their bullish bets in gold to the highest in two months in the week to February 7, US Commodity Futures Trading Commission data showed on Friday. Meanwhile silver eased 0.8 percent to $17.8 per ounce, after earlier touching $18.04 an ounce, its highest level since November 11. Platinum lost 1.6 percent to $994.5 per ounce. Palladium was down 1.3 percent at $774.0 per ounce, after earlier reaching a two-week high of $786.90.
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