February 7, 2017 / 11:16 AM / 5 months ago

PRECIOUS-Gold drifts lower as dollar climbs on European uncertainty

4 Min Read

    * Spot gold taps $1,235.78, highest since Nov. 11
    * Euro set for biggest daily decline of 2017
    * German industry output posts steepest fall in nearly 8
years

 (Updates prices; adds comment, second byline, NEW YORK
dateline)
    By Marcy Nicholson and Eric Onstad
    NEW YORK/LONDON, Feb 7 (Reuters) - Gold slipped from a
three-month peak on Tuesday, pressured by earlier strength in
the dollar as the euro fell on weak German industry data and
nervousness ahead of the French elections. 
    Spot gold        was down 0.2 percent at $1,233.40 an ounce
by 3:18 p.m. EST (2018 GMT), after rising to $1,235.78, its
highest since Nov. 11.
    U.S. gold futures         settled up 0.3 percent at
$1,236.10.
    While controversy over U.S. President Donald Trump's
temporary travel ban on people from seven Muslim-majority
countries has recently boosted the dollar and gold as safe-haven
assets, focus shifted to Europe on Tuesday.        
    "For all of the issues that are raised by Trump, we have to
remember it's a two-sided story for the dollar and what's
happening in Europe is just as important," said Tom Kendall,
head of precious metals strategy at ICBC Standard Bank. 
    "Today the figures were very disappointing in German
manufacturing."
    Weaker output in manufacturing and construction drove the
biggest monthly drop in German industrial production in nearly
eight years in December.             
    The euro           fell against a broadly stronger U.S.
dollar as investors feared far-right, eurosceptic candidate
Marine Le Pen was gaining momentum before France's presidential
election.       
    The dollar index       , which measures the greenback
against a basket of currencies, pared gains and was last up 0.04
percent.
    The prospects of further U.S. interest rate hikes was also a
concern for gold, said Mark To, head of research at Hong Kong's
Wing Fung Financial Group. 
    But gold has recently appreciated as an asset whether in
euros, yen, pounds or dollars, said Matt France, head of
institutional metals sales in Asia for broker Marex Spectron.
    "This is a genuine re-allocation into gold as a safe-haven
trade, not just a reactive trade to U.S. dollar moves," he said
in a note.
    Among other precious metals, silver        fell 0.2 percent
to $17.70 an ounce after rising to $17.79, its strongest since
Nov. 11.
    Platinum        shed 0.7 percent at $1,004.65, after hitting
its highest since Nov. 9 at $1,015.20.
    "Falling projections of diesel's share of the European auto
market could reduce our forecast of European autocatalyst demand
by 163 thousand ounces (koz) in 2020, keeping the platinum
market in surplus for the foreseeable future, ceteris paribus,"
said Standard Chartered in a note.
    "While we believe much of the negative press surrounding
diesel vehicles is already priced into platinum, this and
fragile jewelry demand are the two key price drivers this year."
    Palladium        dropped 1.5 percent at $760.75.

 (Additional reporting by Arpan Varghese and Nallur Sethuraman
in Bengaluru; Editing by Meredith Mazzilli)
  

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