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PRECIOUS-Trump trouble and euro surge extend gold's gains

    * U.S. dollar falls to six-month low as euro surges
    * Trump turmoil reduces rate hike expectations
    * Gold net long falls to two-month low
    * Silver at 3-week high, palladium at 2-mth low

 (Updates prices; adds Fed and analyst comment, second byline,
datelines)
    By Marcy Nicholson and Peter Hobson
    NEW YORK/LONDON May 22 (Reuters) - Gold on Monday extended
its biggest weekly gain in five weeks as the U.S. dollar fell
against the euro, while U.S. political turmoil fueled demand for
bullion as a safe-haven and reduced expectations of rapid U.S.
interest rate rises.   
    Spot gold        was up 0.5 percent at $1,260.96 an ounce at
3:05 p.m. EDT (1905 GMT), while U.S. gold futures        
settled 0.6 percent higher at $1,261.40.
    The metal advanced by 2.2 percent last week as the furor
over U.S. President Donald Trump's alleged links to Russia and
his firing of former Federal Bureau of Investigation chief James
Comey raised concerns about his ability to push through promised
fiscal stimulus.                          
    That caused a rush to safe-haven assets such as gold and
drove U.S. stocks, the dollar and U.S. bond yields lower,
reducing the opportunity cost of holding non-yielding bullion
and making gold cheaper for holders of other currencies. 
    U.S. stocks gained on Monday, but Treasury yields were
little changed and the dollar plunged to a six-month low when
the euro        rallied after German Chancellor Angela Merkel
said it was "too weak" for Germany.                  
            
    Gold investors were looking to news from Washington, said
Commerzbank analyst Carsten Fritsch. 
    "If this escalates further and impeachment claims intensify,
Trump will find it very difficult to push forward his ambitious
tax cut and infrastructure spending plans," Fritsch told the
Reuters Global Gold Forum on Monday. 
    INTL FCStone analyst Edward Meir said: "This should be
bullish for gold since it should keep the (U.S.) Federal Reserve
more dovish on the rate front for a little while longer."
    Higher interest rates would pressure gold prices because
they raise bond yields and tend to boost the dollar. 
    Dallas Fed President Robert Kaplan, a voter this year on the
Fed's policy-setting panel, said on Monday the U.S. central bank
should keep raising rates before year-end, though he was not yet
ready to declare victory on inflation.                          
    Investors' net long position in COMEX gold meanwhile has
fallen to a two-month low, U.S. Commodity Futures Trading
Commission (CFTC) data showed late Friday.             
    "Platinum stood out last week as the only precious metal
posting gains in positioning. This week's CFTC report is likely
to show further short-covering," said Joni Teves, strategist for
UBS Global Research in a note.
    In other precious metals, spot platinum        rose 0.5
percent to $942.90.
    Silver        was up 1.9 percent at $17.14 an ounce, after
rising to the highest in three weeks at $17.21. Palladium       
was 1.44 percent higher at $770.40, after falling to $748.97,
the lowest since March 15.

 (Additional reporting by Devika Krishna Kumar in New York,
Vijaykumar Vedala in Bengaluru; Editing by Mark Potter and Nick
Zieminski)
  
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