January 20, 2017 / 11:23 AM / 4 years ago

PRECIOUS-Gold turns firm as dollar falls after Trump inauguration

* Weak U.S. dollar supports gold price
    * Palladium soars 5.2 pct to highest since May 2015

 (Recasts; updates prices; adds comment, byline, NEW YORK
dateline)
    By Marcy Nicholson and Eric Onstad
    NEW YORK/LONDON, Jan 20 (Reuters) - Gold prices turned up on
Friday, as the dollar fell and U.S. Treasury yields came off
their highs after Donald Trump was sworn in as U.S. president.
    Trump pledged to end the "American carnage" of social and
economic woes in an inaugural address that was a populist and
nationalist rallying cry, prompting investor concern about
protectionist trade policies. 
    "I think some of the populist issue themes that he's touched
on are supportive of gold," said James Steel, chief metals
analyst for HSBC Securities in New York.
    Spot gold was up 0.5 percent at $1,211.30 an ounce by
3:04 p.m. EST (2004 GMT), while U.S. gold futures 
settled up 0.3 percent at $1,204.90 per ounce. 
    The U.S. dollar index, which measures the greenback
against a basket of currencies, fell 0.4 percent after trading
higher earlier in the session. 
    A weaker dollar makes the metal cheaper for holders of other
currencies. 
    Gold shrugged off better-than-expected U.S. jobs, housing
and factory data that reinforced the view that the U.S. economy
is sufficiently robust to warrant interest rate rises.
 
    Philadelphia Federal Reserve President Patrick Harker said
on Friday he expected three interest rate increases in 2017 if
the labor market improves further and inflation moves to the
Federal Reserve's 2 percent goal.  
    Gold is highly sensitive to rising rates, which lift the
opportunity cost of holding non-yielding assets such as bullion 
while boosting the dollar, in which it is priced.  
    "Gold has dropped back from quite a significant technical
level around $1,220, a critical retracement of last year's high
to low move. I would say from here the risks are skewed to the
downside in the short term," Mitsubishi's Butler said.
    In other precious metals, palladium rallied as much
as 5.2 percent to $792.90 an ounce, the highest since May 2015.
    "Some of the good feeling generated by expectations for
expansionist economic policies are good for the PGMs," Steel
said, referring to the platinum group metals.
    "Palladium is more sensitive because the fundamentals are a
lot tighter. A lot of this gets translated into auto demand."
    Silver rose 0.5 percent at $17.09, while platinum
 gained 2.2 percent at $978.90
    The decline in diesel vehicles in Europe is a threat to
platinum prices, Macquarie said in a note. 
    "In 2017, if the European (auto) market grows at the 2-3
percent rate our research group expects, a similar market share
decline for diesel will mean falling sales and a hit to platinum
demand of something like 35,000 oz."

 (Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by David Evans and Chizu Nomiyama)
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