May 26, 2016 / 4:46 AM / 2 years ago

PRECIOUS-Gold gains as traders cover short positions

* Gold up after falling for six sessions since May 17
    * Silver, platinum, palladium also rise
    * Dollar drifts away from two-month peaks

 (Updates prices)
    By Vijaykumar Vedala
    BENGALURU, May 26 (Reuters) - Gold logged its biggest
intraday percentage gain in more than a week as traders covered
short positions, a day after the yellow metal slid to a
seven-week low on expectations the U.S. Federal Reserve would
increase rates as early as June.
    A rally in oil prices and falling dollar also boosted
sentiment, ahead of an extended holiday weekend in the United
States, analysts said. 
    Spot gold rose 0.4 percent to $1,228.95 per ounce at
0648 GMT, its biggest intraday rise since May 17. The metal fell
to $1,217.25 on Wednesday, the lowest since April 6.
    U.S. gold was up 0.5 percent at $1,229.50.
    Spot palladium jumped the most in more than a month,
rising about 3 percent to $542.22 per ounce. It touched a high
of $545.04 earlier in the session. 
    "Today there has been a little bit of recovery due to short
covering and oil prices trading near $50 is also supporting
gold," said Ronald Leung, chief dealer at Lee Cheong Gold
Dealers in Hong Kong.    
    Brent oil futures climbed above $50 a barrel on Thursday for
the first time in nearly seven months, boosted after U.S.
government figures showed a sharper-than-expected drawdown in
crude stocks last week. 
    The prospect of an interest rate hike, as indicated by Fed
meeting minutes released last week, and a strengthening U.S.
dollar have pushed gold down 5 percent so far in May, putting it
on track for its biggest monthly decline since November.
    Gold is sensitive to interest rates, raising the opportunity
cost of holding the non-interest yielding asset.
    Fed Chair Janet Yellen is due to speak on Friday, and could
reinforce expectations that the central bank might raise
interest rates as early as next month, or July. 
    Dallas Fed President Robert Kaplan on Wednesday said he
would support raising interest rates in the "near future",
though a vote by Britain on whether to leave the European Union
will weigh on any Fed rate decision in June. 
    The dollar index inched down 0.1 percent to 95.226,
moving away from a two-month high of 95.661 notched in the
previous session. 
    Among other precious metals, spot silver and spot
platinum rose the most in about two weeks. 
    Investors will be looking for cues from U.S. weekly
unemployment data and pending April home sales figures,
scheduled for later in the day.   

 (Additional reporting by Koustav Samanta in Bengaluru; Editing
by Christian Schmollinger and Biju Dwarakanath)

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