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Gold trades just a tad higher despite impeachment threat

Ravindra Rao

Gold was trading above $1,480 an ounce level as choppiness in equity markets increased safe haven buying. However, the reaction was subdued if we consider the political uncertainty in the US, Brexit concerns and US-China trade deal concerns.

The US House of Representatives on Wednesday voted to impeach President Donald Trump on articles of abuse of power, stemming from Donald Trump’s alleged attempt to pressure Ukraine to announce investigations into his Democratic political rival, Joe Biden; and second, obstruction of Congress, because the President allegedly refused to co-operate with the impeachment inquiry, withholding documentary evidence and barring his key aides from giving evidence.

Donald Trump is only the third President in history to be impeached after Andrew Johnson and Bill Clinton.

The House action sets the stage for a trial next month in the Senate on whether to convict Donald Trump and remove him from office. The Republican Party has a majority in the Senate, making it highly unlikely the president will be removed from office. Additionally, the move is also unlikely to affect Donald Trump’s second bid for Presidential elections in November 2020.

Meanwhile, a thumping majority for Conservative Party in UK election paved way for Britain’s exit from European Union by the January 31 deadline and this helped push British Pound to 18-month high and lent support to global equity markets. Brexit concerns, however, rose as Prime Minister Boris Johnson’s government on Tuesday ruled out an extension to the December 2020 deadline for negotiations on a trade deal with the European Union. Market players are concerned that UK may not have enough time to negotiate trade terms within the deadline and this could hurt UK economy.

On trade front, US-China have reportedly reached phase 1 of trade deal which includes suspension of new tariffs, roll back of some of existing tariffs and increased Chinese purchases of US farm goods. However, the delay in signing the deal and wide differences between US and China has kept market players skeptical about a possible fallout in talks.

Gold has been stuck in a broad range as market players downplay economic and geopolitical risks. Possibility of US-China trade deal and lack of additional monetary easing by major central banks has kept market players on back foot. This could change only if we see a fresh crisis in global market.

(The author is VP- Head Commodity Research at Kotak Securities.)

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Source: Money Control