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5 months ago
PRECIOUS-Gold hits 2-wk high as Fed rate outlook weighs on dollar
March 20, 2017 / 3:58 AM / 5 months ago

PRECIOUS-Gold hits 2-wk high as Fed rate outlook weighs on dollar

    * Spot gold could test resistance at $1,237/oz -technicals
    * Dollar index        hits near 6-week lows
    * SPDR gold holdings fall 0.35 pct on Friday

 (Recasts, updates prices, adds graphic)
    By Sethuraman N R
    March 20 (Reuters) - Gold prices hit a two-week high on
Monday as the dollar slumped to near 6-week lows after the U.S.
Federal Reserve's dovish outlook on the pace of rate increases
this year continued to disappoint dollar bulls. 
    Spot gold        rose 0.5 percent to $1,234.60 per ounce by
0735 GMT, after earlier touching $1,235.50 an ounce, its highest
since March 6.
    U.S. gold futures         gained 0.3 percent to $1,234.10.
    The dollar index       , which measures the greenback
against a basket of currencies, was down 0.3 percent at 100.040,
after hitting a low of 100.020, its worst since Feb. 7.
    Gold prices have rebounded more than $35 from its low hit
before the policy decision to boost rates last Wednesday, while
the dollar has fallen 1.7 percent from its high of 101.71 hit
the same day.
    Fed Chair Janet Yellen's cautious guidance last week has
investors pricing in almost no chance of another rate rise at
the next policy meeting in May, and is seen rising to around
50-50 for June.            
    "The market was geared for a hawkish FOMC and the Fed was
really dovish. There was a lot of short-covering. People are now
putting gold back on the plate and are more comfortable," a Hong
Kong-based precious metals trader said.
    "The dollar is weaker across the board ... It's pushing gold
higher ... a pure technical buying." 
    Spot gold fell in the week to March 14 on firm expectations
that the Fed would hike rates and as the dollar strengthened,
but prices reversed, prompting traders to cover their short
positions.
     Money managers slashed their net long positions in gold by
44,058 lots to 49,835 lots during that week, the lowest since
early January. Managed short positions rose by nearly 10,000
lots to 70,454.
    "With concerns of a more hawkish Fed now easing, the outlook
for gold looks a little bit more positive," ANZ analysts said in
a note. 
    Markets are also looking ahead for a packed week of Fed
messaging, with no less than nine different policy makers set to
speak, including Chair Janet Yellen on Thursday. 
    Spot gold is expected to test a resistance at $1,237 per
ounce, a break above which could lead to a gain to $1,243, 
Reuters technical analyst Wang Tao said.                  
    Holdings of SPDR Gold      , the world's largest gold-backed
exchange-traded fund, fell 0.35 percent to 834.10 tonnes on
Friday.              
    Spot silver        rose 0.4 percent to $17.39 per ounce.
Platinum        was up 0.4 percent at $961.50, while palladium
rose 0.1 percent to $773. 

    
 (Reporting By Nallur Sethuraman in Bengaluru; Editing by
Richard Pullin and Biju Dwarakanath)
  

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