March 20, 2017 / 6:32 PM / in 10 months

PRECIOUS-Gold hits two-week high as dollar tumbles after G20 trade message

    * Spot gold could test resistance at $1,237/oz -technicals
    * Dollar index        drops to six-week low
    * SPDR gold holdings down 0.35 pct on Friday

 (Adds comments, updates prices, adds NEW YORK dateline)
    By Devika  Krishna Kumar and Maytaal Angel
    NEW YORK/LONDON, March 20 (Reuters) - Gold prices edged
higher to a two-week peak on Monday as the dollar slid to a
six-week low after a G20 weekend summit dominated by the U.S.
administration's protectionist stance.
    The precious metal has been rising since Wednesday, when the
dollar dropped after the Federal Reserve raised U.S. interest
rates but stopped short of predicting a sharper acceleration in
monetary tightening over the next two years.
    The dollar fell to a six-week low before recovering to trade
0.1 percent higher        against a basket of currencies.       
    Gold is sensitive to falling interest rates, which reduces
the opportunity cost of holding non-yielding bullion.
    "I think gold prices are going to continue to rally and the
target to the upside is $1,250," said Phillip Streible, senior
commodities broker for RJO Futures in Chicago.
    "I don't anticipate that the Fed will be so aggressive on
raising rates ... and there's a lot of uncertainty with Brexit
becoming official later on in the month and there's a lot of
questions circulating around Russia."
    Markets had been volatile as FBI Director James Comey spoke
on Monday, confirming the agency was investigating possible
Russian government efforts to interfere in the 2016 U.S.
election including any links between President Donald Trump's
campaign and Moscow.             
    Spot gold        rose 0.44 percent to $1,233.92 an ounce by
2:14 EDT (1814 GMT), after touching $1,235.50, its highest since
March 6.
    U.S. gold futures         gained 0.3 percent to settle at
    Breaking a decade-long tradition of endorsing open trade,
G20 finance ministers and central bankers made only a token
reference to trade at the weekend, acquiescing to an
increasingly protectionist United States.             
    Global markets balked at the move which soured risk
appetite, pressuring stocks, the dollar and oil and driving
investors into safe-haven gold.            
    The precious metal has rebounded more than $35 from the low
hit before the Fed policy announcement last Wednesday, while the
dollar has fallen 1.7 percent.
    "The dovish outlook ... following last Wednesday’s Fed
meeting is clearly still having an impact. This is likely to
lure a number of speculative financial investors back into gold
after this group massively reduced their net long positions in
the run-up to the meeting," Commerzbank said.
    Money managers reduced their net long, or buy, positions in
gold by 44,058 lots to 49,835 lots during the week to March 14,
the lowest since early January.        
    Spot gold is expected to test resistance at $1,237, a break
above which could lead to gains to $1,243, Reuters technical
analyst Wang Tao said.                  
    Denting the bullish gold narrative, holdings of SPDR Gold
     , the world's largest gold-backed exchange-traded fund,
fell 0.35 percent to 834.10 tonnes on Friday.              
    Spot silver        rose 0.3 percent to $17.37 an ounce,
while platinum        was up 1.2 percent at $969.70 and
palladium        firmed by 1.1 percent to $781.20.

 (Additional reporting by Nallur Sethuraman in Bengaluru and
Karl Plume in Chicago; Editing by Edmund Blair and James
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