July 27, 2017 / 11:07 AM / 2 years ago

PRECIOUS-Gold falls from six-week high as dollar rebounds

    * Gold steadies as U.S. dollar turns higher
    * Silver hits highest since June 29
    * Palladium at strongest level since June 23

 (Recasts; updates prices; adds comment, byline, NEW YORK
    By Marcy Nicholson and Eric Onstad
    NEW YORK/LONDON, July 27 (Reuters) - Gold fell from a
six-week high on Thursday, pressured by the dollar's bounce on
solid U.S. economic data and as traders digested the Federal
Reserve's Wednesday statement that showed it was closer to
paring its balance sheet.
    The U.S. central bank appeared less confident than it had
about inflation picking up but said it expected to start winding
down its massive holdings of bonds "relatively soon" in a sign
of confidence in the U.S. economy.             
    Spot gold        was flat at $1,260.86 an ounce by 2:26 p.m.
EDT (1826 GMT), after peaking at $1,264.99, its highest since
June 15.
    U.S. gold futures         for August delivery settled up 0.9
percent at $1,260, after falling in the prior session before the
Fed released its statement.
    The dollar turned higher after data showed shipments of key
U.S.-made capital goods increased in June for a fifth straight
    The resulting rise in the greenback pressures
dollar-denominated gold since it makes the metal more expensive
for investors paying in other currencies. 
    "The rebound in the dollar is putting a little pressure on
gold today," said Phillip Streible, senior commodities broker
for RJO Futures in Chicago.
    "The (Fed's) bond buy back policy will most likely go into
effect, and we should see the long end of the (interest rate)
curve start to rise and that could put a little bit of pressure
on gold and a touch of a boost on the dollar index." 
    Fed Funds futures implied on Thursday that traders see a 49
percent chance of the Fed raising interest rates in December,
CME Group's FedWatch said.             
    "Considering that the Fed sees the near-term risk of the
economy is neutral, I don't think the market will expect a third
rate hike in the foreseeable future or at least in this
quarter," Mark To, head of research at Hong Kong's Wing Fung
Financial Group, said.
    Rising U.S. interest rates increase the opportunity cost of
holding non-yielding gold bullion, while boosting the greenback,
in which it is priced.
    In other precious metals, silver        fell 0.4 percent to
$16.55 per ounce, after reaching a one-month high at $16.82. 
    Platinum        fell 0.2 percent to $927, while palladium
       gained 0.7 percent to $871.45 an ounce after touching a
one-month high at $885.30.
    "Palladium still looks quite expensive considering the
weaker demand backdrop in the global car market, but we will
only get more data in early August," Julius Baer's Menke said. 

 (Additional reporting by Nithin Prasad and Arpan Varghese in
Bengaluru; editing by Alexander Smith and Richard Chang)
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