July 19, 2017 / 12:30 PM / 2 years ago

PRECIOUS-Gold slips towards $1,240/oz as U.S. dollar recovers

    * Gold pulls back from two-week peak as US dollar steadies
    * Biggest gold ETF holdings slip to lowest since February
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices; adds comment, second byline, NEW YORK
    By Marcy Nicholson and Jan Harvey
    NEW YORK/LONDON, July 19 (Reuters) - Gold slipped back
towards $1,240 an ounce on Wednesday, after three straight day's
of gains, as the U.S. dollar's recovered slightly from a
10-month low. 
    Bullion held below Tuesday's 2-1/2-week high, when prices
were buoyed by the failure of U.S. President Donald Trump's
healthcare bill to pass the U.S. Senate and by waning
expectations for further interest rate hikes from the Federal
Reserve this year.       
    The U.S. dollar index        rose 0.2 percent, with the euro
       down 0.3 percent, however, taking upward pressure off
    Spot gold        was down 0.05 percent at $1,241.35 an ounce
by 2:56 p.m. EDT (1856 GMT), while U.S. gold futures        for
August delivery closed little changed, up 0.01 percent at
    "With the sluggish dollar yesterday we had a bit of a move
on the upside, but there seems to be some light profit taking
coming in between $1,243-1,245," MKS's head of trading Afshin
Nabavi said. 
    The U.S. currency remained rangebound, however, with
investors wary of making strong bets ahead of major central bank
    Expectations that U.S. monetary policy is on a tightening
path kept gold hemmed into a narrow range in the last quarter
after a strong start to the year. Signs that central banks in
Europe and elsewhere are also turning away from ultra-loose
monetary policies have also weighed on the precious metal. 
    Gold is highly sensitive to rising interest rates, as these
increase the opportunity cost of holding non-yielding bullion.
Rising U.S. rates also lift the dollar, in which gold is priced.
    "It appears as if some Wall Street gold traders long from
the $1,232 area are hoping for this rally to continue and would
be satisfied heading for the exits around the $1,248-$1,252
range," said Walter Pehowich, executive vice president of
investment services at Dillon Gage Metals.
    "In the event the price of gold sells off, they will be
watching the $1,232 level on the downside."
    Holdings of the world's largest gold-backed exchange-traded
fund, SPDR Gold Shares      , fell 5.6 tonnes to 821.45 tonnes
on Tuesday, a low since early February.               
    "We believe a large part of the interest rate hike (and)
monetary tightening expectations are already priced in, so we
don't think that should weigh too much more on gold prices,"
said ING analyst Warren Patterson. 
    Silver        was up 0.2 percent at $16.28 an ounce, off an
earlier two-week high of $16.36. 
    Platinum        fell 0.6 percent at $916.25, while palladium
       was down 0.6 percent at $858.75 an ounce.

 (Additional reporting by Nithin Prasad and Arpan Varghese in
Bengaluru, Editing by David Evans and Mark Potter)
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