May 7, 2018 / 1:50 PM / 15 days ago

PRECIOUS-Gold slips as dollar index climbs to 2018 peak

    * Dollar index hits high for the year
    * Specs cut net long positions in gold in week to May 1
    * GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices, adds analyst comments, adds NEW YORK to
dateline)
    By Renita D. Young and Jan Harvey
    NEW YORK/LONDON, May 7 (Reuters) - Gold slipped on Monday,
snapping three days of gains as the U.S. dollar index
strengthened after last week's soft U.S. jobs data did little to
dampen optimism about the world's largest economy. 
    That left traders betting the U.S. Federal Reserve would
proceed with lifting interest rates this year. Higher rates
typically weigh on gold, as they increase the opportunity cost
of holding non-yielding assets such as bullion. 
    "The dollar in the immediate term is overbought and gold is
oversold today. (Gold) needs to recapture $1,322 to increase,"
said John Caruso, senior commodity strategist at RJO Futures.
    Spot gold        was down 0.04 percent at $1,314.08 an ounce
by 1:36 p.m. EDT (1736 GMT), earlier hitting a one-week high at
$1,318.85. U.S. gold futures         for June delivery settled
down $0.60, or 0.05 percent, at $1,314.10 per ounce. 
    The market was thinned by a national holiday in Britain,
which closed trading desks in London. 
    "The dollar's strength, driven by a less hawkish European
Central Bank and a disparity in bond yields (between the United
States and Europe), has kept gold lower today," said TD
Securities head of commodity strategy Bart Melek. 
    Investors were therefore tempering bets on higher gold
prices, said Commerzbank analyst Carsten Fritsch, with
speculators cutting their net long positions on Comex gold
contracts to the lowest since July 2017 with a "massive
reduction" in the last few trading weeks.             
    "Most speculative investors have thrown in the towel
already," he said.
    Government bond yields in the euro area rose in late Monday
trading after the European Central Bank's chief economist, Peter
Praet, said an earlier unexpected drop in euro zone core
inflation may be a one-off.             
    Initially dropping, bond yields in the single currency bloc
rose after his remarks.             
    The U.S. dollar index hit a 2018 peak against a commodity
basket after U.S. jobs and wages data did little to alter
perceptions of strength in the U.S. economy and consequently
expectations for more Fed rate hikes.                    
    Meanwhile, silver        lost 0.1 percent to $16.47 an
ounce. Palladium        was up 0.1 percent at $967.97 an ounce,
earlier hitting its highest level since April 27 at $980.
    Platinum        gained 0.7 percent to $911.90 an ounce,
having earlier hit its highest price since April 25 at $918.70.
Friday's positioning data from the CFTC suggests the metal may
be due for a bounce, analysts said.
    "With prices near the bottom of the recent one-year range,
platinum is now in the oversold box," Societe Generale said in a
note.

 (Reporting by Renita D. Young in New York and Jan Harvey in
London
Additional reporting by Apeksha Nair in Bengaluru
Editing by Adrian Croft and Matthew Lewis)
  
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