January 9, 2017 / 11:08 AM / 7 months ago

PRECIOUS-Gold rises as markets await Trump, but dollar limits gains

* Gold climbs as markets await Trump administration
    * Funds cut bullish COMEX gold stance to 11-month low
    * Palladium hits highest in more than a month

 (Updates prices)
    By Jan Harvey
    LONDON, Jan 9 (Reuters) - Gold firmed on Monday as
uncertainty ahead of Donald Trump's inauguration as U.S.
President this month supported prices after the previous
session's retreat, though an uptick in the dollar kept a lid on
gains.
    The metal, which posted its biggest weekly increase in two
months last week, lost some ground on Friday after a U.S.
payrolls report supported the view that the Federal Reserve will
raise interest rates this year, boosting the dollar. 
    However, it found good support around $1,170 an ounce, the
23.6 percent retracement of its November to December decline.
    Spot gold was up 0.5 percent at $1,178.50 an ounce at
1250 GMT, while U.S. gold futures for February delivery
rose $5.10 to $1,178.50. 
    "Trump is speaking this week," said Julius Baer analyst
Carsten Menke. "On Wednesday he has a press conference, which
will be very interesting given how gold has reacted since his
election."
     Gold slid more than 12 percent in the past quarter as
Trump's election victory boosted expectations that his tax and
spending policies would boost the dollar and inflation,
prompting more U.S. rate increases.
    "From our perspective, in terms of the overall economic
backdrop, we see no reason to change our views," Menke said. "We
are still bullish on the dollar, we still see more upside for
bond yields, which of course translates into some headwinds for
gold." 
    Hedge funds and money managers cut their bullish positions
in COMEX gold contracts for the eighth straight week in the week
to Jan. 3, taking their holdings to the smallest in 11 months,
data showed on Friday. 
    Gold is highly sensitive to rising U.S. interest rates,
which increase the opportunity cost of holding non-yielding
bullion while boosting the dollar, in which it is priced.
    "The December FOMC minutes released on Wednesday emphasised
that the Fed is also uncertain about the direction of fiscal
policy after Trump's win," Capital Economics said in a note.
    "We still expect the central bank to hike interest rates
four times this year in response to some of Trump's more
inflationary policies."
    Strong outflows from gold-backed exchange-traded funds have
lessened of late, while seasonal buying in the big Asian gold
markets, where India is deep into wedding season and China is
approaching the Lunar New Year, has been strong. 
    Silver was down 0.1 percent at $16.46 an ounce, while
platinum rose 0.4 percent to $970.75.
    Palladium was little changed at $756, having touched
a five-week high at $768.10. It rallied more than 11 percent
last week. 

 (Additional reporting by Swati Verma and Nallur Sethuraman in
Bengaluru; Editing by David Goodman)

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