January 8, 2018 / 10:48 AM / a year ago

PRECIOUS-Gold dips further from 3-1/2-month peak as dollar fights back

    * Euro takes a breather after run higher
    * Speculators raise COMEX gold net longs
    * GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices; adds analysts comments, NEW YORK dateline)
    By Renita D. Young and Jan Harvey
    NEW YORK/LONDON, Jan 8 (Reuters) - Gold edged lower on
Monday, retreating further from last week's 3-1/2-month high as
the U.S. dollar regained some ground against the buoyant euro
and traders bet on further U.S. interest rate hikes after
Friday's payrolls data. 
   The dollar, which has remained weak after its biggest annual
drop since 2003, had helped to lift assets priced in the U.S.
currency, with gold last week registering a fourth straight
weekly gain for the first time since April. 
    Spot gold        was down 0.1 percent at $1,318.84 an ounce
by 1:41 p.m. EST (1841 GMT), while U.S. gold futures        for
February delivery settled down $1.90, or 0.1 percent, at
$1,320.40 per ounce.
    "Gold has been following the dollar pretty heavily. We are
watching the dollar relative to U.S. deficits," said Rob
Haworth, senior investment strategist for U.S. Bank Wealth
Management. "Higher deficits, which it looks like tax cuts will
do, means a weaker dollar. So there's room for gold."
    The dollar rose 0.5 percent against the euro on Monday.
After mixed U.S. payrolls data on Friday, traders of U.S.
short-term interest rate futures continued to bet that the
Federal Reserve will hike U.S. interest rates at least twice in
    Gold is highly sensitive to rising U.S. interest rates,
which increase the opportunity cost of holding non-yielding
bullion while boosting the dollar, in which it is priced.  
    Market participants are awaiting U.S. Consumer Price Index
(CPI) data later this week, which are expected to show inflation
likely increased 0.2 percent in December after rising 0.1
percent in November.          
    "Investors think the Fed is stuck on a path of three rate
hikes right now. Everyone's waiting to see what that inflation
is," said Chris Gaffney, president of St. Louis-based EverBank's
world markets division.
    Longer term, sentiment for gold is bullish, Haworth said.
    "You've seen the longs rebuild pretty heavily. So the
market's kind of following this trend at this point," he added,
referring to the recent commitment of traders report.
    U.S. stocks were little changed after starting 2018 with
strong gains last week.                         
    Among other precious metals, silver        was down 0.7
percent at $17.11 an ounce, having hit a 1-1/2-month high of
$17.29 on Friday.
    Platinum        was 0.2 percent at $971.40 an ounce after
touching a more than 3-1/2-month peak at $973.60 and palladium
       was 0.9 percent higher at $1,099.60, off last week's
record high of $1,105.70. 

 (Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by William Maclean and Richard Chang)
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