March 27, 2018 / 10:59 AM / 4 months ago

PRECIOUS-Gold falls from near six-week high as trade tensions recede

    * Reports China and U.S. quietly working to avoid trade war
    * Dollar recovers versus currency basket
    * Investors eye next jobs report for rate hike clues

 (Updates prices; adds comments, byline, NEW YORK to dateline)
    By Renita D. Young and Maytaal Angel
    NEW YORK/LONDON, March 27 (Reuters) - Gold fell on Tuesday
after hitting a near six-week high as the U.S. dollar rose and
risk appetite revived in global financial markets, but the
precious metal remained underpinned by an array of geopolitical
tensions.
    The U.S. dollar rose versus a currency basket, as returning
risk appetite dented investor appetite for the U.S. currency. A
stronger dollar makes dollar-priced gold costlier for non-U.S.
investors.      
    Stock markets jumped in response to reports the United
States and China were negotiating to avert a trade war, denting
gold's appeal as a safe haven.            
    "There's going to be a few months of talks before
uncertainty around the global trade situation can be erased, and
in the meantime gold will at times benefit," said Simona
Gambarini, commodities economist at Capital Economics.
    "In the short term we definitely see gains (for gold)."
    Spot gold        dropped 0.7 percent at $1,343.84 per ounce
by 1:40 p.m. EDT (1740 GMT), after touching $1,356.66, its
highest since Feb. 16.
    U.S. gold April futures         settled down $13, or 1
percent, at $1,342 per ounce. 
    Underpinning gold, Moscow said on Tuesday it would respond
harshly to a U.S. decision to expel 60 Russian diplomats over a
nerve agent attack on a former Russian spy in Britain, but was
still open to strategic stability talks with Washington.
            
    Market participants are looking ahead to key data, after new
U.S. Federal Reserve Chairman Jerome Powell last week said the
U.S. economy does not appear to be running hot.    
    Forecasts issued by the Fed after last week's meeting showed
central bank policymakers expect to raise interest rates three
times this year, not four as expected. Higher interest rates
make gold a less attractive investment since it does not draw
interest.
    The next employment report will give clues on the pace of
future interest rate hikes.
    "If wages hit a huge increase, but jobs stay the same,
that's really inflationary, and the Fed will have to raise
rates," said Michael Matousek, head trader at U.S. Global
Investors, adding gold buying may pick back up then.
    However, the core personal consumption expenditures index,
the Fed's preferred inflation measure, could potentially make a
larger impact, said Tyler Richey of investment firm Sevens
Report. 
    "If it edged up towards 2 percent, that could really shake
the market just like when it was hit back in February," he said.
    Meanwhile, spot silver        lost 0.7 percent at $16.54 per
ounce after hitting a near three-week high of $16.80.
    Platinum        dropped 1.1 percent at $941.99 per ounce,
hitting $935, its lowest since Jan. 3. Palladium       
increased 0.1 percent at $974.50 per ounce.

 (Additional reporting by Eileen Soreng; editing by Dale Hudson
and Chizu Nomiyama)
  
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