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PRECIOUS-Gold surges to seven-week high on weaker dollar, political risks
June 6, 2017 / 11:17 AM / 6 months ago

PRECIOUS-Gold surges to seven-week high on weaker dollar, political risks

    * Gold rises 1 pct
    * Dollar hits seven-month low, U.S. bond yields fall
    * Palladium highest since Sept. 2014

 (Adds quotes on PGMs, updates prices)
    By Peter Hobson
    LONDON, June 6 (Reuters) - Gold rose to its highest level in
seven weeks on Tuesday as weak economic data in the United
States reduced expectations of rapid U.S. interest rate rises
this year, pushing the dollar to a seven month-low and lowering
U.S. bond yields.             
    Investors were also drawn to gold, seen as a safe place to
park assets, by uncertainty around Thursday's European Central
Bank meeting, an election in Britain and testimony to a Senate
committee by former FBI Director James Comey.             
    A weaker dollar makes gold cheaper for holders of other
currencies, while lower yields reduce the opportunity cost of
holding non-yielding bullion. Interest rate rises, however, push
bond yields higher and tend to strengthen the dollar. 
    Spot gold        was up 1 percent at $1,292.34 an ounce at
1430 GMT, having earlier touched its highest since April 17
    U.S. gold futures         were 1 percent higher at $1,295 an
    "Light positioning and numerous upcoming geopolitical events
should continue to underpin demand for the metal," said MKS PAMP
trader Sam Laughlin in a note. "Targets extend to the 2017 high
around $1,295 and the psychological level of $1,300 above this."
    Gold has risen more than 6 percent since a low of $1,213.81
in early May as political turmoil in the United States created
doubts that President Donald Trump could enact economic
stimulus, pushing down the dollar and bond yields.
    "The uptrend seems intact," said Mitsubishi analyst Jonathan
Butler. "It's been helped by the dollar drifting lower and
equity markets in the U.S. trading more or less flat."
    Weak U.S. economic data has left investors less certain of
aggressive U.S. interest rate rises this year, Butler said,
while bullion traders had already priced in a rate rise this
    European Central Bank policymakers will take a more benign
view of the economy on Thursday and will even discuss dropping
some of their pledges to ramp up stimulus if needed, sources
told Reuters.              
    Butler also said a decision by major gold consumer India to
levy a sales tax on gold at 3 percent rather than the expected 5
percent was supporting bullion prices by spurring demand for
physical metal.             
    In other precious metals, silver        rose 0.9 percent to
$17.67 an ounce, its highest level since April 25. 
    Palladium        climbed 1.9 percent to $857.30 an ounce,
its highest since September 2014 while platinum        gained
1.5 percent to $965 an ounce after touching $967.50, the
strongest since April 24.
    Platinum and palladium, mainly used to make auto catalysts
that clean exhaust fumes, have rallied despite data showing
weaker global auto sales in May, Julius Baer analyst Carsten
Menke said in a note.
    "We see technical rather than fundamental factors behind
this (palladium) rally, supporting bullish sentiment in the
futures market. We stick to our negative view and short
position, expecting prices to realign with the weaker demand
backdrop over the coming months."

 (Additional reporting by Vijaykumar Vedala, Koustav Samanta and
Eric Onstad; editing by Edmund Blair and David Clarke)

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