December 17, 2018 / 11:09 AM / 3 months ago

PRECIOUS-Gold firms as dollar eases, markets brace for Fed

 (Updates prices)
    * Palladium continues to trade at premium to bullion
    * Specs net long in gold for first time since July - CFTC
    * Spec positions in commodities: reut.rs/1o7B9Uu

    By Swati Verma
    BENGALURU, Dec 17 (Reuters) - Gold firmed on Monday as the
dollar eased from near 18-month highs, adding to bullion's
appeal among holders of other currencies, with investors looking
to a U.S. Federal Reserve meeting for clues on interest rate
developments next year.
    Spot gold        was up 0.1 percent at $1,239.46 per ounce
by 1259 GMT. U.S. gold futures        rose 0.2 percent to
$1,243.60 per ounce.
    Markets have priced in a rate rise by the Fed at its Dec.
18-19 Federal Open Market Committee (FOMC) meeting, so the focus
will be on how many hikes will follow in 2019, analysts said.
    "The market is gearing up for price-friendly news this week
from the FOMC and later, from China's annual Central Economic
Work Conference," Saxo Bank analyst Ole Hansen said, referring
to a closed-door gathering of party leaders and policymakers.
    "Based on the data released on Friday, we can see the hedge
funds are net long in gold for the first time in five months.
So, they are gearing up towards a dovish FOMC rate hike stance
on Wednesday," he said.
    Speculators switched to a net long position in gold of
10,252 contracts, adding 11,791 contracts in the week to Dec.
11, the U.S. Commodity Futures Trading Commission said.       
    "Shifting expectations about U.S. monetary policy should
remain a major source of volatility for gold, but headwinds from
the interest-rate cycle should soften as the year progresses.
That said, sustained strength of the U.S. dollar remains the key
risk for gold also next year," Julius Baer analysts wrote.
    Gold prices rose to a five-month peak of $1,250.55 last
week, but gave up their gains as the dollar strengthened.
    The dollar       , however, slipped 0.3 percent on Monday,
having hit a nearly 18-month peak in the previous session.
      
    Silver        gained 0.4 percent to $14.62 per ounce, while
platinum        was down 0.3 percent at $785 per ounce.
    Spot palladium        rose 1.2 percent to $1,252.20 per
ounce. The metal climbed to a record high of $1,269.25 last week
and has risen nearly 18 percent so far this year due to a
prolonged deficit in the market.
    "We believe the tightness is partly due to the market's
small size, its lack of transparency and insufficient liquidity.
Together with the bullishness of the technical traders, this
provides the potential for even higher prices," Julius Baer
analysts wrote.
    "Yet we do not believe these price levels would be
sustainable in the medium to longer term."

 (Reporting by Swati Verma and K. Sathya Narayanan in Bengaluru;
Editing by Dale Hudson and Kirsten Donovan)
  
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