January 25, 2018 / 3:32 AM / 3 months ago

PRECIOUS-Gold hits 1-1/2-year high as dollar slumps

    * Dollar index marks more than 3-year lows
    * ECB interest rate announcement due 1245 GMT
    * Spot gold to gain more to $1,381/oz -technicals
    * Platinum hits highest since March, 2017 on Thursday

 (Adds comment, updates prices)
    By Sethuraman N R
    Jan 25 (Reuters) - Gold prices on Thursday edged up to their
highest since August  2016, buoyed as the U.S. dollar hit
three-year lows after comments by U.S. Treasury secretary Steven
Mnuchin that he welcomed a weaker currency.
    Spot gold        had risen 0.2 percent to $1,360.56 per
ounce by 0724 GMT, after hitting its highest since Aug. 3, 2016
at $1,366.07. 
    U.S. gold futures         were up 0.3 percent at $1,359.70
per ounce.
    The dollar slumped after Mnuchin told the World Economic
Forum in Davos on Wednesday that "obviously a weaker dollar is
good for us as it relates to trade and opportunities". His
comments were seen by markets as a departure from traditional
U.S. currency policy.             
    "Investors were more than willing to pay hefty insurance
premia as a hedge against the inflationary impacts from a 
hapless dollar," said Stephen Innes, APAC head of trading at
OANDA. 
    "With traders' base case scenario to sell the dollar at all
costs, gold prices should remain well supported on dips and
could be poised to move even higher on the next U.S. dollar
wobble."
    The dollar index       , which measures the greenback
against a basket of currencies, was down 0.1 percent after
hitting its weakest since December 2014 at 88.805.
    "We suspect the greenback could move lower still ... 
Conversely, gold’s charts look increasingly constructive and
could likely push higher on technicals alone," said INTL FCStone
analyst Edward Meir.
    The immediate focus was on the European Central Bank's
policy setting meeting later in the day as markets look for any
signs it is worried about the appreciating euro.
    The euro zone economy may be roaring ahead but a rapidly
strengthening euro may see ECB President Mario Draghi pour cold
water on the view the bank is speeding towards an interest rate
hike.             
    "The ECB meeting on Thursday will be pivotal (for gold), as
it could spark the euro (and gold) higher, especially if the
central bank signals a policy shift in its wording," Meir said.
    A stronger euro potentially boosts demand for gold by making
dollar-priced bullion cheaper for European investors.
    Spot gold is expected to gain more to $1,381 per ounce, as
it has broken a resistance at $1,354, said Reuters technical
analyst Wang Tao.             
    "We see a host of ongoing financial market drivers keeping
the gold market tight and prices higher. Further weakness in the
dollar and rising risks of a correction in equity markets, in
particular, should be supportive," ANZ said in a research note.
    Spot silver        was up 0.2 percent at $17.60, after
touching a more than four-month high at $17.69.
    Platinum        rose 0.3 percent to $1,015.24, after hitting
its highest since March 2017 at $1,024.30.
    Palladium        dropped 0.1 percent to $1,109.220.

 (Reporting by Nallur Sethuraman in Bengaluru; Editing by Joseph
Radford and Subhranshu Sahu)
  
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