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Gold rebounds from six-week low as dollar drops

NEW YORK/LONDON (Reuters) - Gold rebounded above a six-week low on Thursday, as the dollar turned lower and ushered in short-covering. Bullion was earlier pressured on proposed U.S. tax reforms and strong economic data that supported the case for another U.S. interest rate hike this year.

A 1000 gram gold bar is seen at the Kazakhstan's National Bank vault in Almaty, Kazakhstan September 15, 2017. REUTERS/Mariya Gordeyeva

Spot gold XAU= was up 0.5 percent at $1,286.60 per ounce by 4:01 p.m. EDT (2001 GMT), after hitting $1,277.26, its lowest since Aug. 16. U.S. gold futures GCcv1 for December delivery settled up $0.90, or 0.07 percent, at $1,288.70 per ounce, after touching a five-week low of $1,280.40.

“The market was oversold, then got a little consolidation bounce at the $1,280 level,” said Bill O’Neill, partner at Logic Advisors in Upper Saddle River, New Jersey.

The dollar turned down from a six-week high. Ten-year U.S. Treasury yields steadied after rising to a 2-1/2-month high on expectations of higher U.S. debt and a December interest rate rise push helped by data pointing to underlying strength in the U.S. economy.

“I think it’s going to be a steady, gradual march of higher (Treasury) yields into year-end, which is not too constructive for gold,” said O’Neill.

Higher bond returns reduce the attractiveness of non-yielding bullion. Interest rate increases raise bond yields and tend to boost the dollar.

Speculative fund investors were sticking with gold and demand was underpinned by geopolitical worries over North Korea’s nuclear programme and an independence vote in Iraqi Kurdistan, said Saxo Bank analyst Ole Hansen.

Technical Fibonacci support for gold was at $1,281.30, analysts at ScotiaMocatta said. The 100-day moving average was at $1,271.

In other metals, platinum XPT= was up 0.4 percent at $919.24 per ounce, earlier dipping to a more than two-month low at $910.50.

Palladium XPD= was up 0.4 percent at $931.00 per ounce.

For the second consecutive day, palladium prices rose above platinum, after speculators piled into the market.

Both metals are primarily consumed by automakers for catalytic converters, but platinum is more heavily used in diesel vehicles that have fallen out of favour.

“In the long run, we believe palladium and platinum could trade at similar levels,” said Samson Li, an analyst with Thomson Reuters GFMS.

“The strength of palladium this year is due to the strong performance of the Chinese auto sector. Sales have been better than expected ... Palladium is like a growth stock while platinum is like a value stock now,” Li said.

Silver XAG= was up 0.4 percent at $16.80 per ounce after dropping to $16.64, its lowest since Aug. 16.

Additional reporting by Arpan Varghese and Nithin Prasad in Bengaluru; Editing by Jon Boyle and Andrew Hay