June 22, 2017 / 11:15 AM / 2 years ago

PRECIOUS-Gold extends rebound above 5-week low, key technical level

    * U.S. yield curve flattest since Dec 2007 on hawkish Fed
    * Dollar index steadies, oil above 10-month high
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Recasts, updates prices; adds comment, second byline, NEW YORK
    By Marcy Nicholson and Zandi Shabalala
    NEW YORK/LONDON, June 22 (Reuters) - Gold rose on Thursday,
rising quietly above the prior session's five-week low as the
dollar steadied and the 200-day moving average provided
short-term support below the market.
    Spot gold        was up 0.3 percent at $1,249.17 an ounce by
3:04 p.m EDT (1904 GMT). It had added 0.3 percent in the
previous session after touching a five-week low of $1,240.75.
    U.S. gold futures         for August delivery settled up 0.3
percent at $1,249.40. 
    "Today is strictly a bounce day. You can't say this is
anything more than a consolidation in gold," said Bill O'Neill,
co-founder of LOGIC Advisors, adding that a rise above $1,260
could attract technical buying and higher prices.
    World stock markets edged higher, buoyed by a modest rebound
in oil prices after the commodity hit 10-month lows, while the
U.S. yield curve managed to stall its recent flattening.
    "The uncontrolled oil price spill in the futures markets may
have seen some traders pushing the risk aversion button and
buying gold," said Jeffrey Halley, senior market analyst at
    "The primary driver appears to be the flattening of the
longer-dated U.S. Treasury curve," he said. 
    The U.S. Treasury yield curve flattened to almost 10-year
lows on Wednesday as investors evaluated the impact of hawkish
Federal Reserve policy on the economy even as inflation measures
are deteriorating.                  
    Gold is highly sensitive to rising rates and yields, which
increase the opportunity cost of holding non-yielding assets
such as bullion while boosting the dollar, in which it is
    "The U.S. is on a solid growth path and on cruising speed,
which justifies higher interest rates and also a stronger U.S
dollar. This is something we believe will cause some headwinds
for gold," Julius Baer's Menke said.
    In technicals, Mitsubishi analyst John Butler said any
significant break on either side of $1,250 would be important
for the price. 
    "We have been testing the uptrend that prevailed at the end
of last year at $1,240 and we have bounced off that level
yesterday," Butler said.
    The U.S. dollar index       , which measures the greenback
against a basket of six currencies, was little changed.
    Holdings in SPDR Gold Trust      , the world's largest
gold-backed exchange-traded fund, rose 0.04 percent to 853.98
tonnes on Wednesday.             
    Among other precious metals, silver        gained 0.9
percent to $16.57 per ounce. Platinum        touched its highest
in a week during the session and was up 0.1 percent at $924.40,
while palladium        eased 0.4 percent at $884.60.

 (Additional reporting by Vijaykumar Vedala in Bengaluru;
Editing by David Evans and Lisa Shumaker)
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