September 6, 2017 / 10:03 AM / a year ago

PRECIOUS-Gold near 1-year high, buoyed by Korea tensions, lower dollar

    * Fed postponing policy normalisation is a plus for gold
    * Debt ceiling standoff sets off alarm bells
    * First upside resistance at $1,352 near Sept 2016 high

 (Updates prices)
    By Pratima Desai
    LONDON, Sept 6 (Reuters) - Gold held near one-year highs on
Wednesday, boosted by tensions on the Korean peninsula and a
lower dollar due to growing expectations the Federal Reserve
will delay rate rises.
    Spot gold        was unchanged at $1,338.30 an ounce at 1054
GMT, a gain of around 8 percent so far this quarter and more
than 16 percent so far this year. It touched $1,344.21 an ounce
on Tuesday, its highest since Sept. 8.
    U.S. gold futures         were down 0.1 percent at $1,343.40
an ounce. 
    "Rising geopolitical tensions, the hurricane hitting the
U.S. and the looming debt ceiling are increasing demand for safe
assets," said Danske Bank analyst Jens Pederson.
    "These extraordinary factors are also weakening the dollar
from the point of view that the Fed may further postpone
normalisation of monetary policy, which would be good news as it
would keep a lid on U.S. yields."
    Both U.S. government bonds and gold are seen as risk-free by
investors. Low U.S. Treasury bond yields mean there is little
opportunity cost in holding gold, which earns nothing and costs
money to insure and store.
    Analysts say low U.S. yields mean investors are unlikely to
buy Treasuries, which would also weigh on the dollar.       
    A lower U.S. currency makes dollar-denominated gold cheaper
for holders of other currencies, which could boost demand.
     A potential standoff over the U.S. federal debt ceiling has
raised alarm bells among investors who fear a repeat of 2011
when a prolonged showdown over increasing the borrowing limit
and subsequent downgrade of U.S. credit quality led to slump in
the S&P 500 stock index.             
    Investor unease was reinforced after a North Korean diplomat
warned his country is ready to send "more gift packages" to the
United States as world powers struggled for a response to
Pyongyang's latest nuclear weapons test.             
    "The concern now is that another launch could take place on
September 9th, which is the (North Korea's) Independence Day,"
said INTL FCStone analyst Edward Meir.
    "Gold is likely to move higher over the course of September,
sustained by a weaker dollar and North Korean tensions...Any
further wobbles in US equities could provide further support and
perhaps nudge it towards our $1390 price target."
    Technical resistance is at $1,352, near the high from last
September, followed by $1,376, the upper Bollinger band on the
monthly charts. But the momentum indicator near zero suggests
gold may be in for a period of consolidation.             
    Elsewhere silver        gained 0.3 percent to $17.95,
platinum        rose 0.3 percent to $1,009.00 and palladium
       added 0.4 percent to $962.05 an ounce.

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
Elaine Hardcastle)
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