September 8, 2017 / 7:56 PM / 12 days ago

PRECIOUS-Gold steady near 1-year high as rate hike expectations ebb

    * Dollar weakest since January 2015
    * Gold up 1.7 percent this week
    * Could reach 2016 high of $1,375/oz -analysts
    * Palladium retreats from 16-year high

 (Updates prices, adds comment, NEW YORK dateline)
    By Devika  Krishna Kumar and Peter Hobson
    NEW YORK/LONDON, Sept 8 (Reuters) - Gold held near its
highest in more than a year on Friday as the U.S. dollar dropped
and weak economic data lowered expectations of a December
interest rate rise in the United States.
    The U.S. dollar hit a more than 2-1/2-year low against a
basket of major rivals on reduced expectations for another
Federal Reserve rate increase this year, while the euro hit
multi-year highs after European Central Bank President Mario
Draghi suggested that the ECB might begin tapering its massive
stimulus program this fall.                                     
    A weaker dollar fuels demand for gold by making it cheaper
for holders of other currencies, and lower bond yields reduce
the opportunity cost of owning non-yielding bullion. Interest
rate rises push up bond yields and boost the dollar.
    Spot gold        was down 0.1 percent at $1,347.8 by 3:43
p.m. EDT (1943 GMT) after hitting $1,357.54, its highest since
August 2016. It was up 1.7 percent this week, notching a third
consecutive weekly gain.
    U.S. gold futures         for December delivery settled at
$1,351.2.
    Julius Baer analyst Carsten Menke pinned the rise to the
weak dollar and hopes that interest rate rises would be delayed.
    New York Federal Reserve President William Dudley in a
speech on Thursday did not repeat an assertion three weeks ago
that he expects to raise rates once more this year.             
    Demand for gold as a safe haven investment was strong as
South Korea braced for a possible further missile test by North
Korea when it marks its founding anniversary on Saturday.
            
    But high prices have weakened demand for physical gold in
top consumer Asia.             
    "By its own account, the Chinese central bank (PBoC) bought
no gold in August, either," Commerzbank said in a note.
    "This was already the tenth consecutive month in which the
PBoC did not further increase its gold reserves."
    Technical resistance was at $1,353, gold's peak last
September, but upward momentum could lift it to the 2016 high of
$1,375, ScotiaMocatta analysts said.
    In other precious metals, silver        was down 0.3 percent
at $18.01 an ounce after touching $18.21, its best since April.
It rose about 2 percent on the week.
    Palladium        was 2.1 percent lower at $934.78 an ounce
and fell more than 4 percent on the week, the first decline in
seven weeks. 
    The metal used in catalytic converters that curb pollution
from vehicle exhausts is trading near its highest since 2001.
But car output in China and the United States is falling and
shortages of metal are unlikely, said Capital Economics analyst
Simona Gambarini in a note. 
    She said palladium looked increasingly vulnerable to profit
taking and would likely fall to $850 by the end of the year.
    Platinum        was down 0.7 percent at $1,008.40 after
touching touched $1,022.70, its highest since March.  

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
Alexander Smith and Richard Chang)
  

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