May 31, 2017 / 7:23 PM / 2 months ago

PRECIOUS-Gold rises as dollar dips, looming U.S. rate hike limits gains

4 Min Read

    * Gold little changed for the month
    * Silver falls after hitting one-month high on Tuesday
    * Palladium on track for first monthly loss this year

 (Updates prices, milestones, dollar move, adds comments, NEW
YORK dateline)
    By Devika  Krishna Kumar and Maytaal Angel
    NEW YORK/LONDON, May 31 (Reuters) - Gold prices rose on
Wednesday as the dollar dipped and simmering geopolitical
tensions lent support, though the metal was little changed for
the month amid an increased chance of a U.S. interest rate rise
next month.
    The dollar edged lower versus a currency basket        amid
growing political tension in Washington. Sterling recovered
after a poll showed Britain's ruling Conservatives still leading
ahead of elections next week. A previous projection indicated a
hung parliament.       
    The greenback's losses, however, were limited by U.S.
economic data this week that supported the case for a Federal
Reserve interest rate hike next month. U.S. economic data on
Wednesday was mixed.                          
    Investors are keenly awaiting Friday's U.S. non-farm
payrolls report, which could set the dollar's tone in the short
term. 
    "While electoral uncertainty in Europe and political
bickering in the US buoyed gold prices in Q2 2017, we continue
to forecast lower gold prices going forward," Societe Generale
analysts said in a note.
     "Fed tightening this year and in 2018 - whether in the form
of higher interest rates or balance sheet deleveraging - will
inevitably dent investors' appetite for gold."
    The bank forecast gold prices to average $1,200 per ounce in
the fourth quarter and recommended selling gold price rallies.
    Higher rates reduce demand for non-interest bearing bullion
and boost the U.S. currency, making dollar-priced gold costlier
for non-U.S. investors.
    Spot gold        rose 0.7 percent to $1,271.14 per ounce by
2:49 p.m. EDT (1849 GMT). It closed 0.3 percent lower on Tuesday
after rising to a one-month high of $1,270.47. For the month,
bullion is up about 0.2 percent.
    U.S. gold futures         was up 0.6 percent at $1,270.30.
    Traders see an 86.6 percent chance of a 25-basis-point rate
hike at the Fed's June 13-14 policy meeting, Thomson Reuters
data shows.
    But some market participants said signs of softness in some
economic data have raised questions about whether the U.S.
central bank can keep to its plan to hike interest rates two
more times this year and begin shrinking its balance sheet.
    The investigations into alleged Russian meddling in the 2016
U.S. election and Moscow's possible collusion with members of
Donald Trump's campaign also have clouded the prospect of a rate
hike next month. Investors fear the probes could hamper the
Trump administration's push for tax cuts and other stimulus
measures.  
    In other trading of precious metals, silver        slipped
0.3 percent to $17.31 an ounce, though it was 0.8 percent higher
for the month.
    Platinum        was up 1.2 percent at $945.3 an ounce after
falling 1.9 percent in the previous session in its biggest
one-day percentage loss in nearly a month. The metal was set for
its first monthly drop this year.
    Palladium        was up 1.4 percent at $816.45 an ounce and
was about 0.3 percent higher for the month.

 (Additional reporting by Vijaykumar Vedala in Bengaluru;
Editing by Paul Simao and Chizu Nomiyama)
  

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