Money Market Guru — Gold headed for the highest close since November and base metals sank after President Donald Trump’s failure to pass signature reform of health care legislation raised questions about his administration’s ability to deliver on other promises including infrastructure, buoying demand for havens.
Bullion for immediate delivery climbed as much as 1.3 percent to $1,259.28 an ounce, and traded at $1,258.32 at 8:23 a.m. in London, heading for the highest finish since Nov. 10. The advance followed two weeks of gains. On the London Metal Exchange, all metals dropped as copper lost as much as 1.5 percent.
Investors on Monday further unwound trades initiated in November resting on the idea that the election of Trump and a Republican Congress meant smooth passage of an agenda featuring tax cuts and regulatory changes that would benefit industrial commodities and hurt gold. With the health-care deal falling through, markets are reassessing Trump’s ability to deliver, according to Bryan Lum, a strategist at Phillip Futures Pte in Singapore.
The defeat of Trump’s bill to repeal and replace his predecessor’s health-care law has “put a bit of a threat under the market in terms of all his other programs,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “Markets are fretting” over the impact on base metals demand if plans for a spending boost on infrastructure are hampered, he said.
Three-month copper dropped as much as $84 to $5,720 a metric on the LME, and traded at $5,729.50, with losses also being driven by prospects for the resumption of output from BHP Billiton Ltd.’s Escondida mine in Chile after a strike. Zinc fell as much as 2 percent, while nickel sank 2.2 percent.
The moves in metals came as the dollar retreated to lose nearly all its gains seen since Trump’s election victory in November. Typically, a weaker greenback would aid gold as well as base metals.