January 4, 2018 / 4:07 AM / in a year

PRECIOUS-Gold prices drop on profit-taking, firmer dollar

    * Spot gold off 3-1/2 month highs hit Wednesday
    * Gold on Wednesday posted first one-day loss in nearly 3
    * Dollar firm on positive U.S. data, Fed minutes

 (Adds comment, updates prices)
    By Sethuraman N R
    Jan 4 (Reuters) - Gold prices fell on Thursday after hitting
a 3-1/2-month high the session before, pulled down as investors
took profits and as the U.S. dollar firmed. 
    Spot gold        was down 0.3 percent at $1,308.82 an ounce
at 0712 GMT. U.S. gold futures         dropped 0.6 percent to
$1,310 an ounce. 
    Spot gold marked its highest since Sept. 15 at $1,321.33 on
Wednesday, but then dropped as the dollar recovered from over
3-month lows. It fell further after minutes from the Federal
Reserve's December policy bolstered expectations for more U.S.
interest rate hikes.             
    Gold, which had rallied $85 from nearly 5-month lows hit in
mid-December, posted its first day of losses in nearly three
weeks on Wednesday.
    "People are looking to lock in some gains after a pretty
strong rally over the past weeks," said ANZ analyst Daniel
    "Geopolitical issues have certainly been a huge power point
of the gold's rally into the year-end ... It is going to be a
U.S. dollar type story going forward with markets taking a
neutral view."
    The dollar was firm on Thursday in the wake of upbeat U.S.
data       .       
    U.S. factory activity increased more than expected in
December, boosted by a surge in new orders growth, in a further
sign of strong economic momentum at the end of 2017.
    Minutes from the Fed's Dec. 12-13 meeting were seen as more
hawkish than anticipated, indicating the central bank is still
poised to raise interest rates several times this year.
    The minutes suggested that the central bank would continue
to pursue a gradual approach in raising rates but could pick up
the pace if inflation accelerates.              
    Gold is highly sensitive to rising U.S. interest rates as
they increase the opportunity cost of holding non-yielding
bullion, while boosting the dollar, in which it is priced.
    "We still feel that gold has come a long way and may correct
a little further from here," MKS PAMP trader Alex Thorndike
    "That being said we view a pullback towards $1,290-$1,295 as
a decent buying opportunity."
    Spot silver        fell 0.6 percent to $17 an ounce, after
hitting a six-week high on Wednesday at $17.24.
    Spot platinum        was down over 1 percent at $943 an
    Spot palladium        rose 0.4 percent to $1,086.95. It
touched an all-time high on Tuesday at $1,096.50.

 (Reporting by Nallur Sethuraman in Bengaluru; Editing by
Richard Pullin and Joseph Radford)
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