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Gold rises on weaker US dollar


COMEX gold trades near $1260/oz Tuesday after a 0.6% gain yesterday. Gold hit a near 5-month low of $1236.55/oz last week but has recovered to trade in vicinity of $1260/oz.

Gold has edged up supported by weakness in US dollar. The US dollar index trades near 93.6 levels after a 0.3% decline yesterday.

The US dollar is choppy post Fed decision last week. Fed raised forecast for 2018 GDP growth estimate indicating faster growth but kept interest rate expectations unchanged. This indicated that the central bank may not raise aggressively in face of faster growth.

However, weighing on gold is optimism about US economy. US DJIA index rose to fresh record high level Monday on progress over US tax reforms. US tax reform bill is expected to be put to vote in US House of Representatives Tuesday followed by a vote in Senate. Market expectations are high that the bill may be approved.

The tax reform bill will reduce taxes for both individuals and corporates which will increase spending and investment. This will boost economic growth and will be positive for US dollar and negative for gold.

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