October 12, 2017 / 7:34 PM / in 10 months

PRECIOUS-Gold climbs to 2-week high ahead of U.S. inflation data

    * Dollar index hits lowest since Sept. 26
    * Palladium touches five-week high
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Adds comments, news from White House, updates prices)
    By Devika  Krishna Kumar and Zandi Shabalala
    NEW YORK/LONDON, Oct 12 (Reuters) - Gold prices edged higher
to a more than two-week high on Thursday as focus shifted to U.S
inflation figures due on Friday which are expected to give more
clues on monetary policy.
    Minutes from a U.S. Federal Reserve September meeting showed
policymakers had a prolonged debate about prospects of a pick-up
in inflation and slowing the path of future interest rate rises
if it did not.             
    The dollar inched up after U.S. data showed new applications
for U.S. unemployment benefits last week fell to a more than
one-month low after being boosted by two hurricanes.
    But the greenback still languished near two-week lows
against a basket of currencies, weighed down by the U.S. Fed
minutes which the market interpreted as dovish.       
    After four straight sessions of gains, spot gold       
steadied at $1,293.40 an ounce by 3:30 p.m. EDT (1930 GMT).
Prices earlier hit $1,297.40, the highest since Sept. 26. U.S.
gold futures         settled higher at $1,296.50 per ounce.
    "The market is looking for a little direction and there's
not much on the horizon until we get more geopolitical conflict
or we see interest rates pick up," said Rob Haworth, senior
investment strategist at U.S. Bank Wealth Management.
    A strong corporate earnings season could also give the Fed
room to continue raising rates, which would be a headwind for
gold, Haworth said.
    Gold is highly sensitive to rising interest rates, as they
tend to boost the dollar, in which the metal is priced.
    Several policymakers said they would focus on upcoming
inflation data over the next few months when deciding on the
central bank's future rate hike path.
    "Overall, for the rest of 2017 we are not bullish on prices,
especially with a rate hike still expected this year, and we are
looking more towards 2018 for strength," RBC Capital Markets
said in a note.
    U.S. President Donald Trump is "some time away" from making
a decision about who should chair the Federal Reserve, White
House chief of staff John Kelly said on Thursday.             
    Political uncertainty also helped to support gold, which
investors turn to during periods of turmoil, analysts said.
    "If people are not too worried about the Fed's policy, we
have North Korea. Surely, geopolitical tensions are supporting
prices," Yuichi Ikemizu, Tokyo branch manager at CIBC Standard
Bank, said. "We may try $1,300 next week."
    The upcoming Diwali festival in India could also spur gold
buying, analysts said.
    Silver        rose 0.4 percent to $17.23 an ounce after
touching a three-week high.
    Platinum        was 0.8 percent higher at $935.49 an ounce,
after hitting a more than two-week high earlier in the session. 
    Palladium        jumped 1.9 percent to $977.25, its highest 
since Sept. 6.
    Discussions over a possible substitution between platinum
group metals in auto catalysts will likely gather pace if the
palladium continues to trade at a premium to the platinum, Bank
of America Merrill Lynch said in a note earlier this month. 

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
Mark Potter and Richard Chang)
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