January 19, 2018 / 1:23 PM / 6 months ago

PRECIOUS-Gold up as dollar hurt by U.S. government shutdown fears

    * Gold, silver, palladium set for first weekly drop in six
    * Platinum on track for sixth weekly gain
    * Analysts cautious on gold as dollar weakness seen overdone

 (Updates prices)
    By Maytaal Angel
    LONDON, Jan 19 (Reuters) - Gold prices rose half a percent
on Friday as the dollar laboured near a three-year low on
heightened fears of a U.S. government shutdown, but the precious
metal was still on track for its first weekly drop in six.
    The U.S. dollar fell versus a basket of currencies after
legislation to stave off an imminent federal government shutdown
encountered obstacles in the Senate late on Thursday. A weak
dollar makes dollar-priced gold cheaper for non U.S. investors.
    Spot gold        was up 0.5 percent at $1,335.76 an ounce at
1314 GMT, on track for a weekly drop of 0.3 percent, having
fallen from four-month highs hit on Monday.
    U.S. gold futures         were up 0.5 percent at $1,334.40.
    Capping gains in gold, bond yields have been rising this
week on expectations that strong economic data globally will
encourage the U.S. Federal Reserve to press on with monetary
tightening.
    Expectations of rising interest rates tend to lift bond
yields, reducing the appeal of holding non-yielding bullion
while also boosting the dollar, in which gold is priced.
    "It all depends on the direction of the dollar and our forex
strategists expect a dollar rebound as a result of rate hikes so
gold should pare some of its gains," said Commerzbank analyst
Carsten Fritsch.
    The Fed should raise interest rates three to four times in
both 2018 and 2019, Cleveland Fed President Loretta Mester said
on Thursday, a pace that is a bit faster than many of her fellow
policymakers prefer.             
    "The overall run in gold has been overdone. The overall
weakness in U.S. dollar is over ... I can't be more cautious on
gold prices at the moment," said Mark To, head of research at
Hong Kong's Wing Fung Financial Group.
    "The fundamentals remain the same with the large trading
range remaining intact at $1,200 to $1,400, with no major change
in global political tensions or rate hike outlook," To said.
    Spot gold is still targeting $1,311 per ounce, as suggested
by a small double-top and a Fibonacci retracement analysis,
according to Reuters technical analyst Wang Tao.             
    Holdings of SPDR Gold Trust      , the world's largest
gold-backed exchange-traded fund, rose 1.4 percent to 840.76
tonnes on Thursday from Wednesday.          
    Silver advanced 0.5 percent to $17.02 per ounce, while
palladium        gained 0.8 percent to $1,108, but both metals,
like gold, were set for their first weekly drop in six.
    Platinum        climbed 1.1 percent to $1,010.90, having hit
its highest since last September at $1,014.50, as it headed for
its sixth weekly gain. 

 (Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by Mark Potter and Edmund Blair)
  
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