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PRECIOUS-Gold buoyed as geopolitical tensions offset stronger dollar
December 19, 2016 / 12:10 PM / 8 months ago

PRECIOUS-Gold buoyed as geopolitical tensions offset stronger dollar

* Shooting of Russian ambassador seen supportive to gold
    * SPDR holdings fall more than 11 pct since November
    * Specs cut net longs in COMEX gold for 5th straight week

 (Updates prices, comment; adds byline, NEW YORK dateline)
    By Chris Prentice and Clara Denina 
    NEW YORK/LONDON, Dec 19 (Reuters) - Gold prices edged higher
on Monday as geopolitical tensions offset expectations of
tighter U.S. monetary policy and a stronger U.S. dollar. 
    Spot gold  was up 0.31 pct at $1,137.55 an ounce by
2:40 p.m. EST (1940 GMT), even as the dollar reversed earlier
losses. It hit $1,122.35, its weakest since Feb. 2, on Thursday
under pressure from a stronger dollar after hawkish rate
forecasts from the Federal Reserve.
    The most active U.S. gold futures for February
delivery settled up $5.3, or 0.47 percent, at $1,142.70 per
ounce. 
    "We are up on geopolitical tensions," said Phillip Streible,
senior commodities broker for RJO Futures in Chicago, noting the
fatal shooting of a Russian ambassador in Turkey was supportive
of bullion, considered a safe-haven investment. 
    Even so, gold prices remained capped by expectations of more
rate hikes to come. The Fed raised rates for the first time in a
year last week and projected three more increases in 2017, up
from the two projected in September. 
    "Coming at a time when investors are mindful of the stimulus
effects of the new incoming U.S. regime (this) is likely to be
good for equity valuation and weigh on gold and risk-off assets,
at least in the short term," Mitsubishi Corp strategist Jonathan
Butler said. 
    The dollar firmed against a basket of currencies
after Federal Reserve Chair Janet Yellen said the U.S. labor
market has improved to its strongest in nearly a decade. 
    Gold is highly sensitive to rising rates, which lift the
opportunity cost of holding non-yielding assets such as bullion,
while boosting the dollar, in which it is priced. 
    High interest rates and a high dollar "will weigh on gold"
going forward, ETF Securities analyst Martin Arnold said.
    The benchmark 10-year U.S. Treasury yield rose
to its highest since September 2014 on Thursday.
    Holdings of the SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, fell 0.6 percent to 836.99
tonnes on Friday. Holdings are down over 11 percent since
November. 
    Hedge funds and money managers cut their net long position
in COMEX gold contracts for the fifth straight week, taking it
to a 10-month low in the week to Dec. 13, U.S. Commodity Futures
Trading Commission data showed on Friday. 
    In other markets, palladium was down 2.79 pct at
$675.60 per ounce after falling to an over one-month low of
$673.50. Spot silver was down 1 at $15.92 an ounce. Platinum
 fell 1.31 pct to $914.5 per ounce.

 (Additional reporting by Swati Verma in Bengaluru; editing by
Greg Mahlich and Tom Brown)

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