July 21, 2017 / 10:10 AM / a year ago

PRECIOUS-Dollar slide sets gold up for best week in two months

    * Gold up over 2 pct this week
    * Dollar hits more than one-year low, bond yields fall
    * SPDR Gold Trust holdings down 4.3 pct this month

 (New throughout with updated prices, milestones, market
comment; adds byline, NEW YORK dateline)
    By Chris Prentice and Peter Hobson
    NEW YORK/LONDON, July 21 (Reuters) - Gold was set for its
biggest weekly gain in two months on Friday as a surging euro
dragged down the U.S. dollar to its weakest since June 2016,
making bullion cheaper for holders of other currencies.
    Bond yields fell after European Central Bank President Mario
Draghi said on Thursday the ECB was in no rush to scale back its
asset purchase program. The greenback retreated against a basket
of major currencies, with the dollar index hitting a more than
one-year low in afternoon dealings.                          
    Central banks have "taken a more dovish tone and the dollar
is working in gold's favor," said Josh Graves, a senior market
strategist with RJO Futures in Chicago.
    Gold is highly sensitive to rising interest rates. Lower
yields help gold prices by reducing the opportunity cost of
holding non-yielding bullion.                        
    Spot gold        was up 0.87 percent at $1,255.0601 an ounce
by 2:21 p.m. EDT (1821 GMT). Prices hit $1,255, the highest
since June 26, and were on track for their largest weekly gain
since May.   
    U.S. gold futures         for August delivery settled up
$9.4, or 0.75 percent, at $1,254.90 per ounce and finished the
week up 2.2 percent.
    While gold was benefiting from the dollar's weakness against
the euro and the move in yields, its gains would be limited by
expected interest rate rises by the U.S. Federal Reserve and it
would remain in a $1,200-$1,250 range, ABN AMRO analyst
Georgette Boele said.  
    The Fed's rate-setting committee is due to meet on July 25
and 26.            
    Gold broke through resistance at its technically important
100- and 50-day moving averages, both around $1,250. 
    Falling bond yields and a weakening dollar have helped gold
rise 3.9 percent from a low of $1,204.45 on July 10, but this
was driven by short-covering and not physical demand, Julius
Baer analyst Carsten Menke said. 
    Holdings in the SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, have fallen 4.3 percent, or
1.2 million tonnes, this month.       
    In other precious metals, silver        was up 1.18 percent
at $16.482 an ounce after touching $16.509, the highest since
July 3. Silver was up 3.3 percent this week, on track for the
largest weekly gain since January. 
    Platinum       rose 0.87 percent to $934.35 an ounce and on
track to end the week up 2.1 percent. Palladium        was up
0.20 percent at $844.22, but set for a weekly fall of 1.6

 (Additional reporting by Nithin Prasad and Arpan Varghese in
Bengaluru; Editing by Bernadette Baum)
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