August 28, 2017 / 10:19 AM / 3 years ago

PRECIOUS-Gold jumps to 9-1/2-month high after central bankers' comments

    * Central bank heads' comments pressure dollar, lift gold
    * Silver rises to 2-1/2-month high
    * Geopolitical risks continue to underpin bullion

 (Recasts to include new milestone, updates prices; adds
comment, second byline, NEW YORK dateline)
    By Marcy Nicholson and Zandi Shabalala
    NEW YORK/JOHANNESBURG, Aug 28 (Reuters) - Gold rallied to a
9-1/2-month high on Monday, breaching $1,300 per ounce as the
dollar fell and the euro rose after the head of the European
Central Bank (ECB) said that the euro zone's economic recovery
had taken hold at a meeting of central bankers.
    At the meeting in Jackson Hole, Wyoming, the ECB's Mario
Draghi said the bank's ultra-loose monetary policy was working
and the euro zone's economic recovery had taken hold, refraining
from commenting on the euro's recent strength.            
    That pushed the euro to its highest in more than 2-1/2 years
against the U.S. dollar, while the dollar index        fell to
its lowest since May 2016.       
    "Draghi did not refer to the strong euro being a brake on
policy normalization - this is what triggered the rally in the
euro and the price reaction in gold mirrors what the currencies
did," Julius Baer analyst Carsten Menke said.
    Spot gold        rose 1.4 percent at $1,309.25 an ounce by
2:01 p.m. EDT (1801 GMT), after rising to its highest since
early November at $1,309.98. 
    U.S. gold futures         settled up 1.3 percent at
    Many traders were away from their desks due to a British
public holiday.
    At Jackson Hole, U.S. Federal Reserve Chair Janet Yellen
made no reference to U.S. monetary policy but instead focused on
financial regulations, leading traders to expect interest rates
to be raised more slowly.                         
    "I think that may have got investors more comfortable to
continue doubting the inflation story and whether they'll be
able to hike (interest rates)," said Ryan McKay, associate
commodities strategist for TD Securities.
    "Once we got to $1,300 and tested it for the fourth or fifth
time, it finally gave way," McKay said, adding that automatic
buy orders pushed prices above that level.
    Gold is highly sensitive to rising U.S. rates, which lift
the opportunity cost of holding non-yielding assets such as
bullion while boosting the dollar, in which it is priced.
    Further supporting gold was geopolitical uncertainty sparked
by U.S. President Donald Trump's renewed threat to scrap the
North American Free Trade Agreement.             
    Speculators raised their net long position in COMEX gold for
the sixth straight week in the week to Aug. 22.        
    In other precious metals, silver        was up 2 percent at
$17.39 an ounce, after touching its highest since early June at
    Platinum        rose 1.3 percent to $984.50 and palladium
       edged up 0.5 percent to $934, close to a 16-1/2-year high
of $940.50 hit on Friday.

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
Dale Hudson and Lisa Shumaker)
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