May 2, 2017 / 11:15 AM / 5 months ago

PRECIOUS-Gold falls to 3-week low as safe-haven demand wanes

    * Dollar at 6-week high vs yen
    * Investors await U.S. Fed statement Wednesday
    * Silver at 3-month low, reaches technically oversold levels

 (Updates prices; adds comment, second byline, NEW YORK
dateline)
    By Marcy Nicholson and Peter Hobson
    NEW YORK/LONDON, May 2 (Reuters) - Gold prices fell to a
three-week low on Tuesday, as demand for riskier assets drove
stocks higher and the dollar hit a six-week peak against the
yen.
    "Risk appetite is back," said Societe Generale analyst Robin
Bhar. 
    Rising share prices increase the opportunity cost of holding
non-yielding bullion, while a stronger dollar              
makes gold more expensive for holders of other currencies.
                 
    Spot gold        was down 0.1 percent at $1,255.43 an ounce
by 2:28 p.m. EDT (1828 GMT), having earlier hit $1,251.37, the
lowest since April 10 and around the 200-day moving average.
    U.S. gold futures         settled up 0.1 percent. 
    "The moving averages tell us objectively that the long-term
trend is no longer bearish. However, gold is yet to break down
its long-term bearish trend line, which again held in early
April," said Fawad Razaqzada, technical analyst with Forex.com.
    "As a result, we have seen a sharp unwinding of the long
positions that had been accumulated since December 2016 and
again in March." 
    Gold fell 0.9 percent on Monday after U.S. lawmakers agreed
on a spending package to avert a U.S. government shutdown and
the Nasdaq share index         reached a record high.
            
    Meanwhile, the market's so-called fear gauge, the VIX
volatility index       , fell to its lowest since 2007 on
Monday. On Tuesday, world stock markets inched higher as
investors awaited the outcome of a two-day U.S. Federal Reserve
policy meeting to be announced at 2 p.m. EDT (1800 GMT) on
Wednesday.                                  
    "If the Fed signals further rate increases and shrinking of
the balance sheet tomorrow and then we get a good jobs number on
Friday we should certainly end the week below $1,250, and maybe
closer to $1,240," said Societe Generale's Bhar. 
    Higher interest rates would cause U.S. bond yields to rise,
making non-yielding gold less attractive.
    In other precious metals, silver        was down 0.4 percent
at $16.78 an ounce, after touching $16.75, its lowest since Jan.
27. It has fallen for 11 out of the past 12 sessions, putting
the spot price on track for the most technically oversold level
on a 14-day relative strength index since November 2015.
    Platinum        was 0.03 percent lower at $924.70, after
falling to a four-month low at $919.
    Palladium        was down 0.2 percent at $813.25. The metal
used in the automotive industry for emission-controlling
catalytic converters is near a two-year high, but car sales are
too weak to sustain it, said Julius Baer analyst Carsten Menke.

 (Additional reporting by Swati Verma in Bengaluru; Editing by
Marguerita Choy and Edmund Blair)
  

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