February 16, 2017 / 3:54 AM / 6 months ago

PRECIOUS-Gold rises as dollar gives up gains; U.S. rates in focus

    * Spot gold may retest resistance at $1,249/oz -technicals
    * Holdings in SPDR Gold Trust rise 0.3 pct on Wednesday
    * Palladium touches highest since Jan. 24

 (Updates prices; adds detail)
    By Arpan Varghese
    Feb 16 (Reuters) - Gold prices rose on Thursday as the
dollar drifted down from one-month highs hit in the previous
session on upbeat U.S. economic data that boosted the prospects
of an interest rate hike by the Federal Reserve next month.
    U.S. retail sales rose more than expected in January and
consumer prices recorded their biggest gain in nearly four
years.             
    Spot gold        had ticked up 0.2 percent, to $1,235.01 per
ounce at 0529 GMT, while U.S. gold futures         were up 0.3
percent, to $1,236.2.
    "Gold is approaching a turning point and the upward trend in
prices could end in the near future," said Jiang Shu, chief
analyst at Shandong Gold Group.    
    "Perhaps the market is currently underestimating the
prospects of an interest rate hike by the U.S. Federal Reserve
in March, given the strong economic data. The impact (on gold
prices) would probably show in the medium term."
    Gold is highly sensitive to rising U.S. interest rates, as
it increases the opportunity cost of holding non-yielding
bullion, while boosting the dollar, in which it is priced.
    The dollar index        fell 0.3 percent to 100.91, with
traders booking profits following the greenback's rally to its
highest since Jan. 12 at 101.76 on Tuesday.       
    The Fed aims to raise rates in the months ahead as long as
the economy continues to grow a bit above its trend and if, as
expected, fiscal policies provide a boost, New York Fed
President William Dudley said on Wednesday. 
    The comments by Dudley reinforced the central bank's
cautious optimism that the Donald Trump administration would not
derail plans for gradual rate hikes in the months and years
ahead.             
    Uncertainty surrounding the European Union and the policies
of President Trump could always provide some short-term support
for bullion, Shu said.
    "The real question is whether Trump's policy ... will alter
the Fed's interest rate policy, and if so, it would have a
long-term effect on gold," he added. 
    Spot gold        may retest resistance at $1,249 per ounce,
according to Reuters technical analyst Wang Tao.             
    "We suspect that investors continue to expect more reflation
(and inflation) coming out of the U.S. and are therefore
reluctant to get too bearish on the precious metal," said INTL
FCStone analyst Edward Meir.
    Meanwhile, spot silver        edged up 0.1 percent, to $18
per ounce, while platinum        also inched up 0.3 percent, to
$1,012.80 as of 0529 GMT.
    Palladium        was mostly unchanged at $789.90 per ounce,
after touching its highest since Jan. 24 at $792.70 earlier in
the session.

 (Reporting by Arpan Varghese in Bengaluru; Editing by Joseph
Radford)
  

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