May 14, 2018 / 10:24 AM / 2 months ago

PRECIOUS-Gold firms as dollar retreats from 2018 peak

    * Geopolitical risks could support gold
    * Gold price expected to remain in narrow range

 (Updates prices)
    By Pratima Desai
    LONDON, May 14 (Reuters) - Gold prices edged higher on
Monday as the dollar retreated from a 2018 peak after subdued
U.S. inflation data last week highlighted the prospect of fewer
U.S. interest rate increases than previously expected this year.
    Spot gold        was up 0.1 percent at $1,318.9 an ounce at
1252 GMT, having touched $1,325.96 on Friday, its highest since
April 26. U.S. gold futures         were down 0.1 percent at
$1,318.8.
    A weaker U.S. currency makes dollar-denominated gold cheaper
for holders of other currencies -- a relationship used by funds
to generate buy and sell signals.       
    Though the dollar eased on Monday, its performance against a
basket of other major currencies touched 93.416 last week for a
gain of more than 4 percent since April 17 and its highest level
since December. 
    "Gold is dollar-driven but it is doing reasonably well given
the dollar is generally stronger," said Macquarie commodities
strategist Matthew Turner.
    Further support could come from rising security risks in the
Middle East after the United States said it would withdraw from
the 2015 international nuclear deal with Iran and reimpose
sanctions.                          
    However, gold is expected to remain in the narrow range in
which it has been trading this year -- mostly between $1,300 and
$1,350 -- unless supply or demand fundamentals change
dramatically.
    "Gold's trading range in the first four months between low
and high price was the lowest in percentage terms since it was
fixed to the dollar in 1971," Turner said. 
    An increase to U.S. interest rates, possibly in June at the
Federal Reserve's next meeting, will weigh on gold, though
analysts say that would be unlikely to push gold significantly
lower. 
    "Over the short term, and particularly during May, we see
gold trading between $1,285 and $1,338 an ounce as continued
strength in the dollar and rising rates pressure values lower,"
said INTL FCStone analyst Edward Meir.
    Traders said that falling gold imports by India, a top
consumer, were also undermining sentiment.             
    Silver        was up 0.1 percent at $16.63 an ounce,
platinum        fell 0.2 percent to $920.00 and palladium       
slipped 0.2 percent to 994.25.

 (Additional reporting by Apeksha Nair in Bengaluru
Editing by David Goodman)
  
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