January 3, 2017 / 7:43 PM / 7 months ago

PRECIOUS-Gold rises to 3-week high as investors gear up for 2017

4 Min Read

* Platinum group metals surge
    * Dollar index hits 14-year high
    * Gold rises after worst quarter since Q2 2013

 (New throughout, updates prices, adds comments, NEW YORK
dateline)
    By Devika  Krishna Kumar and Jan Harvey
    NEW YORK/LONDON, Jan 3 (Reuters) - Gold prices rose 1
percent to a near 3-week high on Tuesday as early gains in
stocks and other assets perceived as risky gave up gains and
investors fled to save-haven bullion. 
    Platinum and palladium both jumped by more than 4 percent 
as investors scrambled for position as the new year got under
way.     
    The themes of late 2016 appeared to be persisting in the
wider markets, with equities rising while the dollar index
touched a 14-year high boosted by strong economic data.
  
    As the session progressed, the dollar and equities pared
gains, supporting gold prices. 
    Spot gold was up 0.6 percent at $1,159.06 an ounce by
2:17 p.m. EST (1917 GMT), while U.S. gold futures for
February delivery ended the session up 0.9 percent at $1,162. 
    The metal fell sharply in the wake of Donald Trump's victory
in November's U.S. presidential election, sliding by more than
12 percent in the fourth quarter. 
    Trump's victory boosted the dollar and sparked a sharp rally
in bond yields, lifting the opportunity cost of holding
non-yielding gold and blunting investors' appetite for the
metal.
    However, Trump could also boost investor interest in the
precious metal, some market participants said.
    "We are not going to dismiss the precious metal completely
considering we still have the Trump card in the pack," said
Mihir Kapadia, CEO and Founder of Sun Global Investments. 
    "At a time when even his tweets are destabilising stocks,
any erratic policy proposals, let alone mismanaged
implementation, can potentially trigger market uncertainty and
increase the investors' interest in gold."
    Indications from the U.S. Federal Reserve that it would
press ahead with further interest rate rises this year are also
buoying the dollar and pressuring gold.
    A strong start to 2016 meant that gold still managed to end
last year with its first annual gain since 2012, rising by 8.5
percent.
    Spot platinum was up 4 percent at $935.24` per ounce
after rising by more than 5 percent. Meanwhile, sister metal
palladium was up 4.5 percent to $709 after rising by
about 5 percent.
    "The repositioning in the futures market in the dying weeks
of last year saw in platinum a rebuilding in the gross short
position, and at the same time long positioning remaining fairly
steady," said Mitsubishi analyst Jonathan Butler. "Right now I
think this is some short-covering driving prices higher.
    "It's the start of the year, and there are some funds
rebalancing their portfolios. There might be some niche funds
that are interested in these metals, so that is part of the mix
as well."
    Palladium was the best-performing precious metal last year,
with the price rising 20 percent for its biggest annual gain in
six years. Platinum lagged gains in the wider complex, however,
ending 2016 only 1 percent higher. 
    Both metals are widely used in autocatalyst manufacturing,
and are more exposed than gold to the economic cycle. 
    Spot silver was up 2.23 percent at $16.29 per ounce.

 (Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by David Goodman and Chizu Nomiyama)

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