February 23, 2018 / 2:46 PM / 4 months ago

PRECIOUS-Gold heads for biggest weekly loss this year as dollar bounces

    * Dollar index up nearly 1 pct this week
    * Buying muted in China after New Year break
    * GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl

 (Recasts throughout; updates prices; adds comment, NEW YORK to
dateline)
    By Renita D. Young and Jan Harvey
    NEW YORK/LONDON, Feb 23 (Reuters) - Gold eased on Friday,
heading towards its biggest weekly decline in 2-1/2 months, as
the U.S. dollar climbed from last week's three-year low on the
back of higher U.S. Treasury yields.
    Bullion has come under heavy pressure this week from a
recovery in the greenback and expectations that the U.S. Federal
Reserve will press ahead with interest rate increases this year,
which tend to weigh on non-yielding gold.
    Rising U.S. yields have put the dollar on track for its
second biggest weekly gain of the year. Stocks have also
steadied after recent sharp losses.             
    Spot gold        was down 0.2 percent at $1,328.74 by 1:37
p.m. EST (1837 GMT), its fifth losing session in six. U.S. April
gold futures         settled down $2.40, or 0.2 percent, at
$1,330.30 per ounce. 
    Spot prices have shed 1.4 percent this week, their biggest
weekly decline since early December, after failing to sustain a
brief push back above $1,360 an ounce last Friday.
    "(Recent) multi-year highs in yields is definitely a factor
for metals today," said Mike O'Donnell, markets strategist at
RJO Futures.
    U.S. Treasury prices gained on Friday and though benchmark
10-year U.S. Treasury yields slipped, they held near a four-year
high reached on Wednesday.             
    Bonds were also supported by the completion of $258 billion
in new supply this week, which was the second largest ever over
a three-day period.             
    A weak euro also pressured gold. "Further weakness in gold
and the euro could be the start of a fresh trend and caution for
bulls is in order," said Friedberg Mercantile Group's Sholom
Sanik.                    
    Minutes of the Fed's latest rate-setting meeting were
released this week and emphasized confidence in the need to keep
raising interest rates. 
    "Despite the hawkish stance by the Fed, which drove this
move in the gold price, we are still above the $1,300 mark,"
said Think Markets' chief market analyst Naeem Aslam, flagging a
key support level. 
    "We think some participants were surprised and unprepared,
which created the largest weekly loss for this year."
    On the physical gold markets, traders said buying was muted
in China after the week-long Lunar New Year holiday that closed
financial markets until Thursday.
    Meanwhile, palladium        increased 0.8 percent at
$1,046.60 per ounce, likely boosted on industrial demand for
catalytic converters in gasoline-burning vehicles, traders said.
The metal was relatively flat from the prior week.
    Silver        dropped 0.6 percent at $16.51 an ounce,
heading for a 0.9 percent weekly decline. Platinum        gained
0.2 percent at $995.80 an ounce, but was down 0.6 percent on the
week.

 (Additional reporting by Eileen Soreng in Bengaluru; Editing by
David Goodman and Chizu Nomiyama)
  
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