May 25, 2017 / 10:48 AM / 2 months ago

PRECIOUS-Gold eases as dollar steadies, stocks rise to records

4 Min Read

    * World equities scale record highs
    * Fed says prudent to confirm recent slowdown is temporary
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Recasts, updates prices; adds analyst and Fed comments, second
byline, NEW YORK dateline)
    By Marcy Nicholson and Zandi Shabalala
    NEW YORK/LONDON, May 25 (Reuters) - Gold eased on Thursday
as the dollar came off its lows and world stock markets scaled
fresh highs, giving back some gains from the prior session when
U.S. Federal Reserve minutes suggested it could be more cautious
with interest rate increases.
    Fed policymakers had agreed at the meeting that they should
hold off from raising rates until it is clear that a recent U.S.
economic slowdown is only temporary, though most said an
increase is coming soon.             
    Higher interest rates tend to boost the dollar and push bond
yields up, increasing the opportunity cost of holding
non-yielding bullion and thereby pressuring gold prices.
    Spot gold        was down 0.2 percent at $1,255.91 an ounce
by 3:32 p.m. ET (1932 GMT), while U.S. gold futures        
settled up 0.3 percent at $1,256.40.
    Capital Economics analyst Simona Gambarini said that gold's
resilience could falter in coming weeks, citing indications in
the Fed minutes that tighter monetary policy is on the cards.
    Federal fund futures implied that traders believe there is
an 83 percent probability that the Fed will raise rates by a
quarter of a percentage point at its June meeting, according to
CME Group's FedWatch tool.             
    Expectations for U.S. interest rates to rise next month and
potentially again later in the year have helped keep gold prices
below $1,300.
    Fed Governor Lael Brainard said that a brighter global
economy is posing less risk to the Fed's U.S. outlook, adding to
the signal the U.S. central bank sent in minutes released this
week that it is likely to move forward with an expected rate
increase in June.             
    "Gold appears to be caught in a range in which the physical
market – demand from India and China – is providing strong
support around $1,200/oz, but safe-haven flows have been
insufficient to breach the $1,300/oz threshold," said Standard
Chartered Precious Metals Analyst Suki Cooper.
    On the technical front, Sucden Financial analyst Kash Kamal
said: "After the golden cross of the 50-day moving average over
the 200-day moving average and yesterday's firm buying early on
towards $1,250, it looks as if prices are consolidating the
recent rally."
    Global equities rose to fresh highs, the dollar index       
came off its lows, and oil prices fell after top oil producers
extended output cuts for a shorter period than expected.
            
    Among other precious metals, silver        fell 0.3 percent
to $17.14 an ounce while platinum        gained 0.3 percent to
$946.95 and palladium        rose 0.9 percent to $770.

    
 (Addtional reporting by Vijaykumar Vedala in Bengaluru,;
Editing by Ed Osmond and Nick Zieminski)
  

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