Gold prices rose to a two-week high on Tuesday, as concerns about US President Donald Trump's new tax plan prompted investors to seek gold as a safe haven asset. The market is also waiting for the Federal Reserve's policy meeting.
Gold prices started the week with a strong increase as investors returned to safe-haven assets to hedge against risks from Mr. Trumps new concerns about tax policies, said market strategist Yeap Jun Rong of IG.
President Donald Trump announced on Sunday that he would impose a 100% tax on films produced abroad, but did not provide specific details. The next day, he said he would announce a new tax rate for the pharmaceutical industry within the next two weeks.
The focus of this week is the Fed meeting and Chairman Jerome Powell's speech on Wednesday, aiming to find a signal about the US interest rate orientation. Since December last year, the FED has kept interest rates in the range of 4.25% - 4.50%.
Any dovish signal from the Fed could further support gold prices and strengthen the current upward momentum, Rong said.
According to a Reuters report, the Fed is likely to keep interest rates unchanged at this meeting. However, this could be the last time the meeting results are predictable, as Trump's new tax policy adds to the uncertainty of the economic outlook.
Goldman Sachs predicts: Fed officials want to see more solid data from the labor market and other economic indicators before cutting interest rates. We expect three cuts of 0.25 percentage points in July, September and October.
Gold - an interest-free asset is often benefited in a low interest rate environment, thanks to its role as a shelter in the context of political and financial instability.
In other precious metals, spot silver rose 1.7% to $33.05 an ounce, platinum rose 1.5% to $973.2 an ounce, and gold rose 1% to $950.66 an ounce.
