July 31, 2017 / 9:13 AM / in 7 months

PRECIOUS-Gold hits highest in 7 weeks on struggling dollar

    * Dollar index at near-16-month lows
    * Gains in gold capped by weak physical demand
    * Platinum, palladium at highest since mid-June

 (Updates prices; adds comment, second byline, NEW YORK
dateline)
    By Marcy Nicholson and Pratima Desai
    NEW YORK/LONDON, July 31 (Reuters) - Gold hit its highest in
almost seven weeks on Monday, boosted by a struggling dollar and
U.S. economic data that cast doubt on whether the Federal
Reserve will raise rates again this year.
    Spot gold        was down 0.1 percent at $1,267.4 an ounce
by 2:00 p.m. EDT (1800 GMT), after rising to its highest since
June 14 at $1,270.98. It is on course for a 2.1 percent rise
this month, its strongest monthly performance since February.
U.S. gold futures         settled down 0.1 percent at $1,266.60.
    "Dollar weakness is driving the gold price. It's not just
against the euro, it's against most major currencies," said
Commerzbank analyst Eugen Weinberg. "U.S. politics is a mess and
U.S. data has not been inspiring."
    The U.S. currency        fell to its lowest in nearly 16
months against a basket of  currencies, making
dollar-denominated gold cheaper for holders of other currencies,
which could mean stronger demand.       
    "Rising geopolitical tensions and political uncertainty,
weak U.S. macro data and a weaker U.S. dollar have buoyed gold
prices," said Standard Chartered in a note.
    "Recovering investor interest has overshadowed the poor
physical market, for now."
    Fed Chairman Stanley Fischer said uncertainty over the
outlook for U.S. healthcare, regulation, taxes and trade could
prompt firms to delay projects until the policy environment is
clearer.                         
    Analysts said decelerating wage growth and subdued inflation
have weakened the case for another rate rise this year. The Fed
has raised rates twice this year.             
    "We think that there is more upside on gold," said INTL
FCStone analyst Edward Meir in a note. "A combination of a
weaker dollar and falling U.S. bond yields should propel the
precious metal higher, with North Korea being a wild card."
            
    However, weak physical demand is expected to limit gold's
gains. Gold prices in India last week recorded the biggest
discount in seven months as a rebound in prices curtailed retail
demand, while lower premiums in other Asian centers failed to
lure customers amid a seasonal slowdown.                     
    Elsewhere, silver        gained 0.8 percent to $16.79 an
ounce, after rising to $16.88, the highest since June 29.
    Palladium        rose 1.1 percent to $886.30, after tapping
a seven-week high at $897.05. Platinum        climbed 1 percent
to $938.30, after rising to $943.70, the highest since June 14.
It made its first monthly gain since February.
    Demand for platinum used in autocatalysts could come under
pressure due to a push towards electric cars powered by
rechargeable batteries and away from vehicles with internal
combustion engines that use diesel.

 (Additional reporting by Nithin Prasad in Bengaluru; Editing by
Bernadette Baum)
  
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