October 13, 2017 / 10:23 AM / 9 months ago

PRECIOUS-Gold at 2-1/2-week high on U.S. data, Trump warning on Iran deal

    * U.S. data shows inflation muted
    * Dollar turns positive after Trump announcement
    * Gold breaks resistance at $1,298

 (Recasts, updates prices, adds comment, NEW YORK dateline)
    By Renita D. Young and Peter Hobson
    NEW YORK/LONDON, Oct 13 (Reuters) - Gold rose to a
2-1/2-week high on Friday after U.S. President Donald Trump
warned he might ultimately end a 2015 nuclear agreement with
Iran and after weak U.S. inflation data undermined the case for
interest rate rises.
    Underlying inflation in the United States remained muted in
September despite a surge in gasoline prices after hurricanes
disrupted production in the Gulf.             
    Markets were pricing in an 82 percent chance of a December
rate hike, down from 87 percent before the data were released,
according to CME Group's FedWatch tool.     
    Gold is sensitive to rising rates because they push bond
yields higher and tend to boost the dollar, which reduces the
attractiveness of non-yielding bullion while making it more
expensive for holders of other currencies.
    Spot gold        rose for a sixth straight session on
Friday, and was up 0.8 percent at $1,303.5 an ounce by 3:53 p.m.
EDT (1953 GMT), after hitting $1,302.40, the highest since Sept.
26. It was set for a weekly gain of 2 percent.     
    U.S. gold futures         for December delivery settled up
$8.10, or 0.6 percent, at $1,304.60 per ounce, also touching the
highest level in more than two weeks.
    The price gains propelled gold through Fibonacci resistance
and the 50-day moving average at around $1,298. 
    "Once gold crossed past the $1,300 key psychological level,
we saw aggressive buying," said Phillip Streible, senior
commodities strategist at RJO Futures in Chicago.
    Trump struck a blow against the Iran agreement on Friday,
choosing not to certify that Tehran is complying with the deal
and warning he might ultimately terminate it.            
    A more confrontational stance on Iran would add to worries
over North Korea and political chaos in Washington and increase
demand for gold as a safe haven, Saxo Bank analyst Ole Hansen
    The U.S. dollar index        turned slightly higher after
his announcement, but was almost flat at 3:44 p.m. EDT.
    "It was a little knee jerk reaction," Bill O'Neill, partner
at Logic Advisors in Upper Saddle River, New Jersey, said of the
dollar's rise. "The announcement was pretty much as expected."
    A higher dollar makes commodities priced in the greenback
more expensive for holders of other currencies.
    Elsewhere, European Central Bank chief Mario Draghi on
Thursday defended a pledge to keep interest rates at rock bottom
and the Bank of Japan's Haruhiko Kuroda stressed resolve to
maintain ultra-loose monetary policy.                          
    Silver        was up 1.09 percent at $17.36 an ounce after
hitting a three-week high of $17.39. 
    Platinum        was up 1.13 percent at $945.50 an ounce,
hitting a three-week high of $946.10 and palladium        was
1.8 percent higher at $990.50 after hitting a 5-1/2-week high of

 (Additional reporting by Apeksha Nair in Bengaluru; editing by
Adrian Croft and Susan Thomas)
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