October 19, 2016 / 10:00 AM / in 2 years

PRECIOUS-Gold rises above key technical level amid Fed rate hike uncertainty

* Markets to watch ECB policy meeting on Thursday
    * Coming up: Final U.S. presidential debate late Wednesday

 (Updates prices; adds comment, second byline, NEW YORK
    By Marcy Nicholson and Clara Denina 
    NEW YORK/LONDON, Oct 19 (Reuters) - Gold rose to a two-week
high on Wednesday, gaining for the third straight session and
breaching the 200-day moving average amid uncertainty over the
timing of a U.S. interest rate increase and ahead of the final
U.S. presidential debate.
    Spot gold was up 0.5 percent at $1,268.44 an ounce by
2:27 p.m. EDT (1827 GMT), after touching its highest since Oct.
5 at $1,273.34. U.S. gold futures settled up 0.6 percent
at $1,269.90. 
    Spot prices had fallen about 7 percent over the past three
weeks, as markets re-priced the likelihood of a Federal Reserve
rate increase in December.
    "Technically, gold is well supported above $1,250 an ounce
... today's push in the $1,270 area is a positive signal ahead
of the U.S. elections and the possible Fed rate hike in
December," ActivTrades chief analyst Carlo Alberto De Casa said.
    The metal is highly sensitive to rising rates, which lift
the opportunity cost of holding non-yielding assets.
    "Since (Fed Chair) Janet Yellen's speech last Friday, there
is the growing view, which I think is the right view, that the
Fed is going to move very slowly. The market has discounted a
December rate hike," said Bill O'Neill, co-founder of LOGIC
    The third and final U.S. presidential debate between Donald
Trump and Hillary Clinton starts at 9 p.m. ET (0100 GMT) on
    "The uncertainty that brings about is a little supportive,"
O'Neill added.
    Fed fund futures <0#FF:> imply a 65 percent probability of
the Fed raising interest rates by December, down from 70
percent. The change was seen after U.S. consumer prices data on
Tuesday showed a moderation in underlying inflation.
    "The market is keeping an eye on the potential rate hike in
December, which we don't expect because once we get close to the
meeting, the Fed will see that key figures are not doing well
enough to justify another rate hike and there will be some
support for gold," said Danske Bank senior analyst Jens
    A European Central Bank policy meeting on Thursday will also
be monitored by markets, Pedersen said. 
    The U.S. dollar turned up slightly against a basket
of six main currencies, as data on Wednesday pointed to
sustained housing market strength. 
    Spot silver was up 0.2 percent at $17.63 an ounce.
    Platinum rose 0.2 percent to $943 and palladium
 fell 0.3 percent to $636.50. 

 (Additional reporting by Apeksha Nair in Bengaluru; Editig by
Mark Potter and Steve Orlofsky)
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