September 14, 2017 / 6:25 PM / 9 days ago

PRECIOUS-Gold up from two-week low as dollar extends losses

    * Dollar extends losses after inflation data
    * Palladium at near 1-month low, platinum at 2-1/2-week low
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices; adds comment, second byline, NEW YORK
dateline)
    By Marcy Nicholson and Jan Harvey
    NEW YORK/LONDON, Sept 14 (Reuters) - Gold rebounded from a
two-week low on Thursday as North Korea threatened the United
States and Japan, and the dollar softened despite strong U.S.
consumer inflation data, which could allow further interest rate
increases from the Federal Reserve. 
    A North Korean state agency threatened to use nuclear
weapons to "sink" Japan and reduce the United States to "ashes
and darkness" for supporting a U.N. Security Council resolution
and sanctions over its latest nuclear test.             
    "These types of comments create a certain bid underneath the
market," said Phillip Streible, senior commodities broker for
RJO Futures in Chicago.
    "Dollar weakness is (also) giving it some strength."
    Spot gold        was up 0.4 percent at $1,328.33 an ounce by
2:03 p.m. EDT (1803 GMT), above an earlier low of $1,315.71, its
weakest since Aug. 31. 
    U.S. gold futures        for December delivery settled up
0.1 percent at $1,329.30.
    Also supportive was Chinese bitcoin exchange BTCChina's
announcement that it would stop all trading from Sept. 30.
            
    "That's creating an asset allocation shift back into more
traditional safety plays in the gold market," Streible said.
    The U.S. dollar index        fell 0.4 percent against a
basket of currencies. The drop came despite data showing a
faster-than-forecast increase in domestic consumer prices in
August.       
    Firming inflation could support the case for another rate
increase and send the U.S. currency significantly higher,
analysts said.             
    "We still expect the Fed to hike rates in December, which
the market doesn't," Julius Baer analyst Carsten Menke said. 
    The Fed has a 2 percent inflation target, and a series of
subdued inflation readings have dampened expectations for
further rate rises in the near term.
    Although in the longer run a more inflationary environment
could support gold demand, both a stronger dollar and higher
rates would probably weigh on the metal in the near term. 
    Spot gold prices hit their highest in more than a year last
week at $1,357.54 an ounce on the back of a softer dollar and
concerns over North Korea's nuclear ambitions, which knocked
stocks sharply lower.
    Equities, which have since recovered, retreated again.
           
    Silver        was up 0.01 percent at $17.73 an ounce, while
platinum        was up 0.5 percent at $981.80 an ounce, after
falling to the lowest since Aug. 28 at $971.50.
    Spot palladium        was 1.4 percent lower at $923.48,
after falling to the lowest since Aug. 18 at $914.

 (Additional reporting by Eric Onstad in London and Apeksha Nair
in Bengaluru; Editing by Mark Potter and Chizu Nomiyama)
  

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