February 12, 2018 / 3:09 PM / 5 months ago

PRECIOUS-Gold rises, but gains capped before U.S. price data

    * Dollar on track for weakest day since Feb. 1
    * Eyes on U.S. inflation data due Wednesday

 (Updates prices; adds comment, second byline, NEW YORK
dateline)
    By Marcy Nicholson and Pratima Desai
    NEW YORK/LONDON, Feb 12 (Reuters) - Gold prices rose on
Monday as the dollar eased, but gains are expected to be muted
ahead of inflation data from the United States later this week
that could mean U.S. interest rates rise faster than expected. 
    Spot gold        was up 0.5 percent at $1,323.16 an ounce by
2:26 p.m. EST (1926 GMT). It has fallen more than 3 percent
since hitting a 17-month peak at $1,366.07 in January. U.S. gold
futures         settled up 0.8 percent at $1,326.40.
    Worries about inflation in the United States surfaced after
data this month showed jobs growth surged and wages rose,
bolstering expectations that the U.S. labor market would hit
full employment this year.             
    U.S. inflation data for January is due on Wednesday and the
U.S. Federal Reserve next meets on March 20-21.            
    "The story is and will be about U.S. monetary policy and
dollar direction," Julius Baer analyst Carsten Menke said. "U.S.
growth is more solid, wages are rising and the worry is the Fed
will be forced into more rate hikes than currently expected."
    The dollar        eased against a basket of six major
currencies as a bounce in equity markets ended a strong run for
the greenback, used by investors as a safe place to park assets
in times of financial market volatility.       
    A weak greenback makes dollar-denominated gold cheaper for
holders of other currencies, potentially boosting demand.
    World shares rallied on Monday in a broad advance that
brushed off fresh rises in global bond yields that have been
driven by inflation fears as investors shifted asset allocations
after the worst week in global markets in the past two years.
           
    "In the short term, I would expect gold to react more
directly to the fortunes of the U.S. dollar, customarily its
strongest driver," said Tai Wong, head of base and precious
metals trading at BMO Capital Markets in New York.
    "COMEX gold saw significant long liquidation according to
CFTC data just through last Tuesday and gold bulls are
reinstating long positions as markets have apparently
normalized."  
    Hedge funds and money managers slashed their net long
position in COMEX gold for the first time in eight weeks in the
week to Feb. 6, and cut it in silver, U.S. Commodity Futures
Trading Commission data showed on Friday.        
    Silver        gained 1.2 percent to $16.55 an ounce,
platinum        added 0.7 percent to $971.50 an ounce and
palladium        was up 1.1 percent at $986.97 an ounce.

 (Additional reporting by Nallur Sethuraman and Nithin Prasad in
Bengaluru, and Maytaal Angel in London; Editing by William
Maclean and Lisa Shumaker)
  
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