April 26, 2018 / 11:17 AM / 4 months ago

PRECIOUS-Stronger dollar traps gold near five-week lows

    * Dollar near 3-1/2-month high
    * U.S. 10-year Treasury yield near four-year peak
    * Market looks to U.S. data on Friday

 (Recasts, updates prices; adds comment, byline, NEW YORK to
dateline)
    By Renita D. Young and Peter Hobson
    NEW YORK/LONDON, April 26 (Reuters) - Gold prices hovered
near five-week lows on Thursday as a stronger U.S. dollar and
lofty U.S. bond yields dampened interest in bullion. 
    Spot gold        dropped 0.4 percent at $1,317.31 per ounce
by 1:40 p.m. EDT (1740 GMT), while U.S. gold June futures
        settled down $4.90, or 0.4 percent, at $1,317.90. 
    "It's interesting to see yields up, but the dollar strength
is really what's following through," said Rob Haworth, senior
investment strategist for U.S. Bank Wealth Management.
    Worries about the growing supply of U.S. government debt and
inflationary pressures from rising oil prices this week pushed
U.S. 10-year note             yields above 3 percent for the
first time in four years.      
    That reduced the appeal of gold, which does not pay yields,
and helped thrust the dollar to its strongest since January,
making bullion more expensive for holders of other currencies.
      
    Interest from physical buyers and technical support at
gold's 100-day moving average, $1,319.51, was helping to prevent
further falls. 
    "At these low (price) levels, the market could now attract
some physical buying interest," said Peter Fung, head of dealing
at Wing Fung Precious Metals. "The market has a very good
(physical) support at around $1,310-$1,315."
    Gold has been supported by geopolitical uncertainty, which
has fueled demand as a safe haven, but prevented gold from
moving higher in fears of rising U.S. interest rates that would
push up bond yields and strengthen the dollar. 
    U.S. GDP and inflation data on Friday could give new
direction to prices, said Mitsubishi analyst Jonathan Butler. 
    Stronger-than-expected economic growth or inflation would
hurt gold by bolstering expectations of more rapid increases in
interest rates. 
    However, "when rates hit these highs in the longer term, it
is inflationary, and sometimes you see that flight back to
gold," said Mike O'Donnell, senior market strategist at RJO
Futures.
    Analysts and traders polled by Reuters this month said gold
would average $1,334 an ounce this year and $1,352 an ounce next
year, barely shifting from its current price.             
    They expected silver       , which was up 0.1 percent at
$16.54 an ounce on Thursday, to fare better, averaging $17.28 an
ounce this year and $18 next year. Silver dropped to a more than
two-week low at $16.41.
    Meanwhile, platinum        rose 0.4 percent at $909.10 per
ounce after earlier hitting more than a four-month low at $901.
    Palladium        rose 0.9 percent at $986.20 per ounce.
    Analysts and traders polled by Reuters expected average
prices of both metals to be higher this year and next.
            

 (Additional reporting by Swati Verma in Bengaluru
Editing by Edmund Blair and Chris Reese)
  
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