May 12, 2017 / 10:42 AM / 4 months ago

PRECIOUS-Gold firm as U.S. political concerns lend support

    * Political drama in Washington unsettles investors
    * Gold has biggest one-day gain in a month on Thursday
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices; adds comment, second byline, NEW YORK
dateline)
    By Marcy Nicholson and Zandi Shabalala
    NEW YORK/LONDON, May 12 (Reuters) - Gold rose on Friday and
was set to end the week little changed as the sudden sacking of
the head of the FBI in the United States stoked investor
concerns and boosted demand for bullion, and the U.S. dollar and
Treasury yields fell.
    Spot gold        was up 0.3 percent at $1,228.01 an ounce by
2:52 p.m. EDT (1852 GMT), hovering around the 100-day moving
average. Gold rose 0.5 percent in the previous session, its
biggest one-day gain in a month.
    U.S. gold futures         settled up 0.3 percent at
$1,227.70.
    "You continue to see the political uncertainty continue to
support gold," said ETF Securities analyst Martin Arnold, citing
the dismissal of the Federal Bureau of Investigation's (FBI)
James Comey and the upcoming British election as sources of
uncertainty.
    U.S President Donald Trump on Thursday ran into resistance
for calling ousted Federal Bureau of Investigation chief Comey a
"showboat". The attack was swiftly rebuffed by top U.S. senators
and acting FBI Director Andrew McCabe, who pledged that an
investigation into possible Trump campaign ties to Russia would
proceed.             
    But capping gains in gold are expectations that the U.S.
Federal Reserve will increase interest rates in June.      
    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.
    Traders are expecting a 100 percent probability of an
interest rate increase in June, CME Group's FedWatch showed.
    "After the recent drop, we perceive gold as looking
technically stretched, negative momentum indicators are
beginning to fade and a June Fed rate hike seems largely
expected," said Giovanni Staunovo, analyst for UBS Chief
Investment Office.
    World stock markets paused near record highs after
underwhelming U.S. retail sales data and worries over China's
banking system spurred investors to lock in recent profits and
pushed U.S. Treasury yields and the dollar lower.
                              
    "Gold has found technical support from a rising trend line,"
said Fawad Razaqzada, technical analyst for Forex.com.
    "But with the long-term bearish trend line still in place
and the metal recently moving back below the technically
important 50- and 200-day moving averages, the path of least
resistance remains to the downside despite the bounce." 
    Among other precious metals, silver        rose 0.7 percent
to $16.41 while platinum        eased 0.1 percent lower to
$913.65, both set for their first weekly rise in four.
    Palladium        rose 0.2 percent to $803.

    
 (Additional reporting by Nallur Sethuraman in Bengaluru,
editing by Toby Davis and Chizu Nomiyama)
  

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