* Political drama in Washington unsettles investors
* Gold sees best one-day gain in a month on Thursday
* Spot gold may drop to $1,209/oz - technicals
By Sethuraman N R
May 12 Gold prices rose on Friday for a second
straight session as political uncertainty in the United States
following the sacking of FBI chief James Comey pressured the
dollar and equities fell.
Spot gold rose 0.2 percent to $1,227.33 per ounce at
0707 GMT. Spot gold rose 0.5 percent in the previous session,
its best one-day gain in a month.
It had earlier hit an eight-week low of $1,213.81 an ounce
U.S. gold futures were 0.3 percent higher at
$1,227.20 an ounce.
President Donald Trump on Thursday ran into resistance for
calling ousted Federal Bureau of Investigation chief Comey a
"showboat." The attack was swiftly rebuffed by top U.S. senators
and acting FBI Director Andrew McCabe, who pledged that an
investigation into possible Trump campaign ties to Russia would
"Whatever Trump says is important and is affecting the
markets and may influence gold prices for the short-term," OCBC
analyst Barnabas Gan said.
"But, from the second half of the year it should depend on
the dollar strength and interest rate environment... We are
expecting another two hikes in 2017, which should be bearish for
New applications for U.S. jobless benefits unexpectedly fell
last week, while producer prices rebounded strongly in April,
pointing to a tightening labour market and rising inflation that
could spur the Federal Reserve to raise interest rates in June.
Gold is highly sensitive to rising rates, which lift the
opportunity cost of holding non-yielding assets such as bullion,
while boosting the dollar, in which it is priced.
The dollar traded below an eight-week high against the yen
"While we are somewhat encouraged by the steadiness we are
seeing in gold of late, we would still like to observe the
action from the sidelines for a little while longer in order to
make sure that this is not another bull trap," INTL FCStone
analyst Edward Meir said.
"We get a host of Chinese macro releases out over the
weekend, providing the commodity group with more direction
heading into next week as well."
Spot gold may drop to $1,209 per ounce, as its downtrend
from the April 17 high of $1,295.42 remains steady, Reuters
technical analyst Wang Tao said.
Asian stocks followed an overnight drop on Wall Street, with
MSCI's broadest index of Asia-Pacific shares outside Japan
falling 0.2 percent.
Among other precious metals, silver rose 0.8 percent
Platinum edged up 0.6 percent to $920.25, while
palladium rose 0.1 percent to $802.05.
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Sonali
Paul and Christian Schmollinger)