December 18, 2017 / 11:00 AM / 6 months ago

PRECIOUS-Gold extends gains as U.S. tax bill concerns hit dollar

    * Platinum hits highest level since Dec. 6
    * Platinum likely to rise in January, February -analyst

 (Updates prices, headline; adds comment, NEW YORK dateline,
byline)
    By Renita D. Young and Eric Onstad
    NEW YORK/LONDON, Dec 18 (Reuters) - Gold edged higher on
Monday as uncertainty over U.S. tax legislation weighed on the
dollar, while an analyst said bullion might face renewed
headwinds early next year. Platinum rose 2 percent as investors
recovered short positions.
    Spot gold        was up 0.53 percent at $1,261.87 an ounce
by 1:40 p.m. EST (1840 GMT) after hitting $1,263.98, its highest
since Dec. 6.
    U.S. gold futures         for February delivery settled up
$8, or 0.6 percent, at $1,265.50 per ounce. 
    Platinum        rose 1.8 percent to $909.25 an ounce after
rising to $915, its highest since Dec. 6.   
    The dollar index        fell, making bullion denominated in
the greenback cheaper for buyers using other currencies, as
concerns grew over whether the proposed U.S. tax code overhaul
would have a major impact on economic growth.       
    "If (the tax bill) were to pass, we think the gold price
would fall lower," said Rob Haworth, senior investment
strategist for U.S. Bank Wealth Management. "That has to do with
stronger growth, more room for the Fed to normalize interest
rates. That should create a headwind for investors."
    Higher interest rates usually push gold lower because they
raise bond yields, reducing the appeal of non-yielding bullion,
and boost the dollar, making gold more expensive for holders of
other currencies.
    "If the tax proposal were to fail, there would be some
reason to think there's political risk at that point because it
would take the market by surprise, and that would provide some
support for gold," Haworth added.
    Top U.S. Republicans expect Congress to pass the bill this
week, with votes in the House of Representatives and Senate as
early as Tuesday.                          
    A final bout of dollar strength could hit gold into 2018,
sending prices down $25 to $50, but then it should recover, said
analyst Carsten Menke of Julius Baer in Zurich. 
    In other precious metals, platinum reached a 1-1/2-week
high.
    "Platinum was trending significantly lower, got a little
oversold and right now, it's covering of short positions," a New
York-based trader said.
    Having risen 1.7 percent during the last session, platinum
is on track for its biggest two-day rally since January.
    Prices of the metal have increased in January and February
over the past 15 years due to maintenance shutdowns in South
Africa, which accounts for 70 percent of platinum, Menke added.
    Silver        was up 0.4 percent at $16.12 an ounce after
rising to a nearly two-week high of $16.17.
    Palladium        fell 0.6 percent to $1,017 an ounce.

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
Dale Hudson and Lisa Von Ahn)
  
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