August 1, 2017 / 10:04 AM / in 15 days

PRECIOUS-Gold at 7-week high after tepid U.S. economic data

3 Min Read

    * Dollar index edges up from 15-month low
    * Spot gold breaks above long-term downtrend -analyst

 (Rewrites throughout, updates prices; adds comment, second
byline, NEW YORK dateline)
    By Marcy Nicholson and Eric Onstad
    NEW YORK/LONDON, Aug 1 (Reuters) - Gold prices rose to a
seven-week high on Tuesday, after U.S. economic data showed
lukewarm inflation and nearly flat consumer spending, raising
the question of whether the Federal Reserve will raise interest
rates in the coming months. 
    Spot gold        rose 0.3 percent to $1,273.26 an ounce by
1:49 p.m. EDT (1749 GMT), after rising to $1,273.97, the highest
since June 14. It rose 2.2 percent last month, its biggest
monthly gain since February.    
    U.S. gold futures         for August settled up 0.5 percent
at $1,279.40. 
    "The continuation of weakness in the data is having people
question the Fed and if inflation will be able to pick up longer
term, and that's what's really driving (gold)," said Ryan McKay,
associate commodities strategist for TD Securities.
    "People are starting to question (a U.S. rate hike) more and
we've seen a rebound from the lows of $1,200, and I think that's
due to people becoming less certain that this is going to
happen."
    The dollar edged higher as investors consolidated positions,
after the falling to a 15-month low on U.S. political
uncertainty and lackluster data, which kept the Federal
Reserve's policy outlook uncertain.                   
    A firmer dollar makes commodities such as gold that are
priced in the greenback more expensive to buyers outside of the
United States.
    A measure of U.S. factory activity fell from a near
three-year high in July, consumer spending barely rose, and
there was little sign of inflation.             
    "Yesterday for the first time on a monthly close, gold broke
above a downtrend that had prevailed since the high in 2011.
This is quite a bullish technical signal and potentially
demonstrating the start of a new trend," said analyst Jonathan
Butler at Mitsubishi in London.
    Investors are also looking ahead to the U.S. non-farm
payrolls data later this week and how that will affect the
dollar.
    "We continue to expect the Fed to remain on hold in the
coming months, and then to hike by 25 basis points in December,
while the balance sheet adjustment should be gradual, setting a
favorable backdrop for gold," Standard Chartered analyst Suki
Cooper said in a note.
    In other precious metals, silver        fell 0.2 percent to
$16.75 per ounce. 
    Palladium        gained 1 percent to $891.90 per ounce,
after it hit a near seven-week high of $900. It rose almost 5
percent in July. 
    Platinum        climbed 1.2 percent to $947.10 per ounce,
after rising to $947.60, a high since June 14. It closed July
higher, its first monthly gain since February.

 (Additional reporting by Nithin Prasad and Arpan Varghese in
BENGALURU, editing by David Evans and Diane Craft)
  

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