May 17, 2018 / 9:58 AM / a year ago

PRECIOUS-Gold slides to fresh 2018 low as dollar strengthens

    * U.S. 10-year Treasury yield touches seven-year high
    * Further weakness in gold price likely - ABN Amro analyst
    * GRAPHIC-2018 asset returns:

 (Updates prices)
    By Jan Harvey
    LONDON, May 17 (Reuters) - Gold slid to a fresh low for the
year on Thursday as another rise in U.S. bond yields and
concerns over political risk in Italy held the dollar index near
its 2018 peak.
    The precious metal has fallen more than 2 percent this week
on gains in the U.S. currency and a rise in U.S. 10-year
Treasury yields to seven-year highs. Higher yields increase the
opportunity cost of holding non-yielding assets such as bullion.
    Spot gold        was down 0.2 percent at $1,288.25 an ounce
by 1145 GMT, off an earlier 4-1/2 month low of $1,285.41 an
ounce. U.S. gold futures        for June delivery were down
$4.00 at $1,287.50. 
    The dollar has climbed nearly 4 percent this quarter on
expectations that the Federal Reserve will lift U.S. interest
rates further this year to curb inflation, at a time when other
central banks are still keeping monetary policy loose.       
    "I expect further weakness in gold prices because I think
the dollar can rise a bit further," ABN Amro analyst Georgette
Boele said.
    "Gold prices are mainly driven by the U.S. dollar and then
U.S. yields ... our year-end 10-year U.S. Treasury forecast
stands at 3.2 percent, with three more Fed rate hikes."
    The euro remains under pressure, hovering near a five-month
low on concerns that political developments in Italy could cause
wider disruption in the common currency bloc.             
    Political uncertainty arising out of North Korea after
Pyongyang threatened to pull out of a meeting with the United
States was likely to limit downside for gold, analysts said. But
that was not enough to offset dollar strength.              
    From a technical perspective, gold prices were looking
vulnerable to further losses after breaking below key chart
levels this week, according to analysts who study past price
moves to determine the future direction of trade.
    "Gold has eroded key support, namely the 200-day moving
average, the $1,302.74 March low and the 50 percent retracement
(of the December-to-January rally)," Commerzbank said in a note
on technicals. "We have been forced to neutralise our outlook as
the market is now on the defensive."
    Among other precious metals, silver        was up 0.3
percent at $16.40 an ounce, having touched its lowest in two
weeks at $16.17 in the previous session.
    Platinum        was down 0.2 percent at $885.60 an ounce,
off an earlier five-month low of $880.50, while palladium       
was 0.2 percent lower at $981.80 an ounce.

 (Additional reporting by Apeksha Nair in Bengaluru
Editing by David Goodman and Edmund Blair)
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