LONDON (Reuters) - Gold prices rose to more than five-week highs on Monday after the United States said it would expel 60 Russian diplomats, prompting investor flight into assets considered safe havens.
The United States was joining governments across Europe in taking action against the Kremlin after a nerve agent attack on a former Russian spy in Britain.
Gold, which is sought as a store of value in times of political and financial uncertainty, rose to its highest since Feb. 16 at $1,355.85 an ounce.
By 1500 GMT spot gold was up 0.6 percent to $1,355.15 while U.S. gold futures for April delivery added 0.4 percent to $1,355.
“I would attribute the rise in gold in the afternoon to the political developments,” said Quantitative Commodity Research consultant Peter Fertig. “You could expect the Russians to retaliate.”
The dollar index, which measures the greenback against six major currencies, fell to a five-week low.
The spectre of a global trade stand-off, however, appeared to be receding after the United States and South Korea agreed to revise a trade pact, with U.S. automakers winning improved market access and Korean steelmakers hit with quotas but avoiding hefty tariffs.
The Wall Street Journal, meanwhile, reported that the United States and China had started negotiations to improve U.S. access to Chinese markets.
Analysts said gold continued to be supported by last week’s statement from the U.S. Federal Reserve, which forecast at least two more increases to interest rates in 2018, one less than previously expected by many observers.
Investors continued to monitor other developments, such as Trump’s appointment of John Bolton as national security adviser and fresh tensions between Saudi Arabia and Yemen’s Houthi militia.
The appointment of Bolton, who has previously advocated using military force against North Korea and Iran, last week provoked strong reactions worldwide.
Speculators cut their net long positions in gold in the week to March 20 by 23,822 contracts to 121,838 contracts, U.S. Commodity Futures Trading Commission data showed on Friday.
“Short term, we expect gold to hover around $1,350 for the next few weeks. We estimate gold to close the year around $1,410-$1,420,” said Joshua Rotbart, managing partner at Hong Kong-based J. Rotbart & Co.
Among other precious metals, silver climbed 1.3 percent to $16.74 an ounce, platinum rose 0.8 percent to $954.30 and palladium was up 0.6 percent at $982.20.
Additional reporting by Eileen Soreng in Bengaluru; Editing by Dale Hudson and David Goodman