July 17, 2018 / 10:31 AM / in 3 months

PRECIOUS-Gold drops more than 1 pct as dollar strengthens during Fed testimony

 (Recasts headline, lead paragraph; updates prices; adds
comment, second byline, NEW YORK to dateline)
    * Focus turns to Powell's testimony for Fed policy outlook
    * Spot gold to break support at $1,237/oz - technicals
    * SPDR gold holdings down 0.15 pct on Monday

    By Renita D. Young and Maytaal Angel
    NEW YORK/LONDON, July 17 (Reuters) - Gold declined more than
1 percent and hit its lowest in a year on Tuesday as the U.S.
dollar strengthened during testimony by U.S. Federal Reserve
Chairman Jerome Powell to the U.S. Congress.
    Powell offered an upbeat view of the U.S. economy in an
appearance before the Senate Banking Committee, with markets
expecting two more interest rate increases this year amid a
continued economic expansion.             
    The dollar, in which gold is priced, gained against a basket
of currencies during the testimony, making gold more expensive
for non-U.S. investors.       
    "The dollar is really reacting to this 'goldilocks' effect
of the economy and a slowly rising interest rate environment.
That is usually a recipe for a stronger dollar," said David
Meger, director of metals trading at High Ridge Futures in
Chicago.
    Higher interest rates make gold more expensive to own since
bullion does not earn any interest or dividends, and costs money
to store and insure.
    Spot gold        was 1.1 percent lower at $1,226.91 per
ounce by 1:36 p.m. EDT (1736 GMT), having earlier hit its lowest
since last July at $1,225.58. The metal is down more than 5
percent for the year.
    U.S. gold futures         for August delivery settled down
$12.40, or 1 percent, at $1,227.30 per ounce. 
    The International Monetary Fund warned on Monday that
escalating trade tensions following U.S. tariff actions threaten
to depress medium-term growth prospects.                
    The comments came as China reported slower second quarter
growth, though Beijing said that would not affect its 2018
growth target. 
    UBS economists lowered their estimates for Chinese growth to
take into account trade war escalation.
    "If China is slowing down, there will be consequences to
global commodity consumption and that's going to drag gold down
as well," said Richard Xu, a fund manager at China's biggest
gold exchange-traded fund, HuaAn Gold. 
    "Chinese gold ETF liquidity has dropped a lot these days so
that means people do not see any major breakthrough in either
direction," Xu added.
    Demand for gold in top-consumer China has been weak as an
ongoing trade dispute with United States has weakened the local
currency.             
    Spot gold could break support levels at $1,220 and the
psychologically-important $1,200, said Josh Graves of RJO
Futures.
    Silver        fell 0.9 percent to $15.60 an ounce, dipping
to $15.51, its lowest since July 2017.
    Platinum        fell 1.2 percent to $812 an ounce, hitting a
two-week low at $808.89. Palladium        fell 0.4 percent to 
$913.50 per ounce, sliding to $905.05, its lowest since April 9.

 (Additional reporting by Apeksha Nair in Bengaluru;
Editing by Alexandra Hudson and Steve Orlofsky)
  
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