February 7, 2018 / 1:38 AM / 14 days ago

Gold slips but underpinned by view dollar bear run still in place

LONDON (Reuters) - Gold slipped on Wednesday as the dollar strengthened and global shares clawed their way off two-month lows, though the precious metal was underpinned by the view that the dollar’s bear run remains in place despite rate hike expectations.

The dollar rose versus the euro on disappointment over reports that the leader of Germany’s Social Democrats (SPD), Martin Schulz, would not be taking over as finance minister for Europe’s biggest economy. [FRX/]

A stronger dollar makes dollar-priced gold costlier for non-U.S. investors.

Gold, seen as a safe haven asset, has failed to capitalise this week from the biggest selloff in six years in global equities, but the precious metal, still driven largely by dollar movement, is not poised to unwind.

“The general scenario for gold is still positive. What we are seeing now (on the stock markets) is just a correction, and the dollar is still weakening (longer term),” said Carlo Alberto De Casa, chief analyst at Activtrades.

“I‘m expecting gold to remain above $1,300 in the next few months. The problem for gold would be four (U.S.) rate hikes, but I don’t believe (that will happen). At this stage inflation is still under control,” he added.

Spot gold dipped 0.2 percent to $1,322.74 per ounce, as of 1314 GMT. Prices fell over 1 percent to hit their lowest since Jan. 11 at $1,319.96 on Tuesday. U.S. gold futures for April delivery fell 0.3 percent to $1,325.30 per ounce.

World stocks clawed their way back from two-month lows on Wednesday, though momentum was weak and U.S. futures suggested Wall Street could lapse back into losses after rebounding from a rout that wiped $4 trillion off world equities. [MKTS/GLOB]

Traders dialled back bets the U.S. central bank would ratchet up the pace of rate increases on Monday to between two and three hikes from three to four hikes last week, according to interest rates futures.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 1.4 percent to 829.27 tonnes on Tuesday from Monday. [GOL/ETF]

Holdings saw their worst one-day fall since December 2016.

Spot gold may test a support at $1,316 per ounce, as suggested by a retracement analysis and a head-and-shoulders, according to Reuters technical analyst Wang Tao.

Spot silver dipped 0.2 percent to $16.58 per ounce.

Platinum fell 0.9 percent to $981 per ounce after touching its lowest since Dec. 11 earlier.

Palladium fell 1.3 percent to $997.20 per ounce, having touched its lowest since Dec. 7.

Additional reporting by Nithin Prasad and Nallur Sethuraman; Editing by Susan Fenton and Adrian Croft

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