January 3, 2017 / 10:46 AM / 7 months ago

PRECIOUS-Gold slips as strong dollar keeps up pressure on prices

3 Min Read

* Dollar climbs 0.5 pct against the euro, stocks rise
    * Gold extends losses after worst quarter since Q2 2013
    * Prospect of further rate hikes weighs on prices

 (Updates throughout, adds LONDON dateline)
    By Jan Harvey
    LONDON, Jan 3 (Reuters) - Gold fell on Tuesday as the
dollar's buoyant start to the new year kept up the pressure on
prices after the metal posted its biggest quarterly loss in more
than three years.
    The themes of late 2016 appeared to be persisting in the
wider markets in the new year, with stock markets bouncing,
while the dollar posted its biggest rise in two weeks.
  
    Spot gold was down 0.3 percent at $1,148.30 an ounce
at 1030 GMT, while U.S. gold futures for February
delivery were down $2.80 an ounce at $1,148.90.
    Gold fell sharply in the wake of Donald Trump's victory in
the U.S. presidential election in November, sliding more than 12
percent in the fourth quarter. 
    Trump's victory boosted the dollar and sparked a sharp rally
in bond yields, lifting the opportunity cost of holding
non-yielding gold and blunting investors' appetite for the
metal.
    "The market has carried the theme of higher dollar, yield
and stocks into 2017 -- a formidable challenge to gold," Saxo
Bank's head of research Ole Hansen said. There were however some
potential positives for gold, he added.
    "We have plenty of event risks is month, with Donald Trump
(taking office) on January 20 being the biggest," he said. "With
exposure cut dramatically, we may see the selling pressure from
long liquidation fade, as most of the those adjustments would
have been carried out before year-end."
    Hedge funds and money managers slashed their net long
positions in COMEX gold to a near 11-month low and trimmed
bullish bets in silver contracts in the week to Dec. 27.
 
    A strong start to 2016 meant gold still managed to end last
year with its first annual gain since 2012, of 8.5 percent.
    Indications from the Federal Reserve that it would press
ahead with further interest rate hikes this year after only
their second rise in a decade last month are buoying the U.S.
currency, and therefore pressuring gold.
    "Further to the Fed's interest rate hike in December, along
with a bullish view of the U.S. economy and the prospects for
three more interest rate hikes in 2017, gold will remain weak,"
Sun Global Investments said in a note on Tuesday.  
    Silver was down 0.2 percent at $15.91 at ounce, while
platinum was 0.5 percent higher at $903.75 and palladium
 was up 0.8 percent at $684.15.
    Palladium was the best performing precious metal last year,
rising 20 percent, its biggest annual gain in six years.
Platinum lagged gains in the wider complex, however, ending 2016
up just 1 percent. 

 (Additional reporting by Nallur Sethuraman in Bengaluru,
editing by David Evans)

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