* Gold marks highest level since May 1 earlier in the day
* Gold may retrace to a support at $1,252 per ounce-
* Dollar index hovers near six-month lows
(Recasts throughout, updates prices, adds quote)
By Vijaykumar Vedala
May 18 Gold prices weakened after touching a
more than two-week high on Thursday, weighed down by
profit-taking amid political turmoil in the United States.
The yellow metal rose about 2 percent on Wednesday in its
biggest one-day percentage gain since June last year, as
pressure on U.S. President Donald Trump deepened following
reports that he tried to interfere with a federal investigation.
That came after a turbulent week when Trump fired FBI
Director James Comey and discussed sensitive national security
information with Russia's foreign minister, causing investors to
question whether Trump can push through tax cuts and
"We are seeing some squaring off probably from Asian traders
and perhaps just a bit correction from the moves overnight,"
said Jeffrey Halley, senior market analyst at OANDA.
"I would caution that the gold rally has been driven by
political news and not necessarily fundamentals. Should the
political storm die in Washington, the rally will lose steam."
Spot gold was down 0.2 percent at $1,258.02 per ounce
by 0805 GMT after earlier touching its strongest since May 1 at
$1,263.02. The yellow metal settled higher in the five previous
U.S. gold futures were nearly flat at $1,258.40 an
"Asia saw mixed interest on Thursday as profit taking
battled against underlying interest," MKS trader Sam Laughlin
said in a note.
"We are likely to see profit taking weigh upon the metal
over the short term, however the current political climate in
the U.S. should see underlying interest continue to support the
metal around $1,250."
Gold is used as an alternative investment during times of
political and financial uncertainty.
Spot gold may retrace moderately to a support at $1,252 per
ounce, before retesting a resistance at $1,264, according to
Reuters technical analyst Wang Tao.
"I think prices have already been pushed up and we might see
reversing of gold prices in one or two days. People are likely
to go back to basics and see what the interest rates are going
to be," said Ronald Leung, chief dealer at Lee Cheong Gold
Dealers in Hong Kong.
On Thursday, the dollar stood near six-month lows against a
basket of major currencies, while Asian stocks fell, with MSCI's
broadest index of Asia-Pacific shares outside Japan
dropping 0.6 percent.
Among other precious metals, silver slipped 0.6
percent to $16.75 an ounce, platinum was down 0.5 percent
at $936.90 an ounce, while palladium shed 0.4 percent to
(Reporting by Vijaykumar Vedala in Bengaluru; Editing by
Richard Pullin and Biju Dwarakanath)