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PRECIOUS-Gold up on early dollar weakness, but gains seen limited
October 18, 2016 / 10:11 AM / in a year

PRECIOUS-Gold up on early dollar weakness, but gains seen limited

* Gold holdings in ETFs up more than 2 pct since mid-Sept
    * Upside faces 200-day moving average at $1,265
    * Platinum, palladium up from multi-month lows

 (Updates prices; adds comment, byline, NEW YORK dateline)
    By Marcy Nicholson and Pratima Desai
    NEW YORK/LONDON, Oct 18 (Reuters) - Gold prices rose on
Tuesday, supported by weakness in the U.S. dollar index, though
receding worries about the outcome of the U.S. election and
expectations of a U.S. rate increase in December could mean
lower levels.
    Spot gold was up 0.6 percent at $1,262.84 an ounce at
2:49 p.m. EDT (1849 GMT), holding just below the 200-day moving
average. U.S. gold futures settled up 0.50 percent at
$1,262.90. 
    The U.S. currency fell by as much as 0.3 percent, prior to
paring losses as it retreated from Monday's seven-month high
against a basket of currencies, making dollar-denominated gold
cheaper for holders of other currencies. 
    U.S. consumer prices rose in September, suggesting a steady
build-up of inflation pressures that could keep the Fed on track
to raise interest rates in December. 
    According to CME Group's FedWatch program, the chances of
the U.S. Fed hiking rates in December are about 70 percent. A
rate hike is typically a source of pressure for bullion prices.
 
    "People are waiting for December to see what happened with
the Fed, over the next month or so there could be a little more
downside," Warren Patterson, commodity strategist at ING, said. 
    "There's also more optimism that Hillary Clinton will
probably win the election." 
    Traders said the U.S. election polls were partly behind
funds cutting speculative positions, but that was offset to an
extent by investors' rising interest in physically backed gold
exchange traded funds. 
    Overall gold holdings in ETFs at 57.433 million ounces are
up more than 2 percent since Sept. 15. 
    A Reuters survey of delegates at a conference in Singapore
showed gold prices rising to almost $1,350 by October 2017 as
higher physical demand offsets losses due to a Fed rate rise.
 
    "Looking ahead, the coming quarters may present significant
headwinds to the global economic outlook and as a result could
see investment demand for gold pick up considerably," said
Sucden Financial in a note.
    "However, with sentiment torn between a President Trump
scenario, which has buoyed investment demand, and the Fed
tightening in December, which erodes the need for a safe haven,
we anticipate price activity throughout the remainder of the
year to trade with increased volatility."
    Silver was up 1 percent at $17.61 an ounce, while
palladium was up 0.5 percent at $640, up from Friday's
three-month low.
    Platinum rose 0.9 percent to $945 an ounce, up from a
7-1/2-month low of $923 reached on Monday. 

 (Additional reporting by Apeksha Nair and Nallur Sethuraman in
Bengaluru; Editing by Louise Heavens and Diane Craft)

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