July 28, 2017 / 10:44 AM / 3 years ago

PRECIOUS-Gold hits 6-week high after U.S. data dampens rate hike expectations

    * Gold up 1.2 pct for week so far
    * U.S. economy accelerates, inflation weaker than expected
    * Dollar nears 13-month lows

 (Recasts; updates prices; adds comment, byline, NEW YORK
dateline)
    By Marcy Nicholson and Peter Hobson
    NEW YORK/LONDON, July 28 (Reuters) - Gold prices rose to a
six-week high on Friday after weaker than expected U.S.
inflation dampened expectations that the U.S. Federal Reserve
will aggressively raise interest rates and North Korea fired a
ballistic missile, triggering safe-haven buying. 
    Data on U.S. second quarter gross domestic product (GDP) and
labor costs also pushed the dollar lower, making bullion cheaper
for holders of other currencies.                          
             
    "It showed a big fall in annual inflation rates across the
board ... so there is no urgency for the Fed to raise interest
rates," said Commerzbank analyst Carsten Fritsch. 
    Gold is sensitive to rising rates because they push up bond
yields, making non-yielding gold less attractive, and tend to
boost the dollar.
    Spot gold        was up 0.8 percent at $1,268.84 an ounce by
1:50 p.m. EDT (1750 GMT), after touching $1,270.38, the highest
since June 14. It was on track to rise for a third week in a
row.
    U.S. gold futures         for August delivery settled up 0.7
percent at $1,268.40.
    North Korea fired a missile on Friday in an unusual
late-night test launch, and details announced by Japanese
officials and media suggested it could be an intercontinental
ballistic missile (ICBM).             
    "There has to be at least a modest factor here that risk is
rising in North Korea. We're not off to the races, we're not
above $1,300 yet, but certainly there is room for speculators to
increase their position," said Rob Haworth, senior investment
strategist at U.S. Bank Wealth Management.
    "It doesn't hurt that you've got a weak U.S. dollar, and
real rates have fallen off a little bit. Interest rates are
under pressure, inflation's in question."
     The U.S. dollar index        fell on a combination of
underwhelming U.S. economic data and political uncertainty,
while global stock markets were also weak.                   
    Julius Baer analyst Carsten Menke said the rally was fragile
because it has been accompanied by physical market selling and
he expected prices to fall to $1,200 an ounce.
    Globally, the market had a surplus of 138 tonnes in the
first half of 2017 as demand from physically-backed exchange
traded funds tumbled, GFMS analysts at Thomson Reuters said this
week.             
    In other precious metals, silver        was up 1 percent at
$16.69 an ounce, on track for a third weekly gain.
    Platinum        was 1.2 percent higher at $933.60 an ounce
but set for its first weekly decline in three. Palladium       
was up 0.7 percent at $878.72, and was on track for its
strongest weekly performance in seven weeks.

 (Additional reporting by Nithin Prasad and Arpan Varghese in
Bengaluru; editing by Elaine Hardcastle and Cynthia Osterman)
  
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