January 10, 2020 / 11:06 AM / 18 days ago

PRECIOUS-Gold extends fall as fading Middle East tensions boost risk appetite

 (Adds comments, details; updates prices)
    * U.S. non-farm payrolls due at 1330 GMT
    * Dollar index on track to post best week in 2 months
    * SPDR Gold holdings fell 0.5% on Thursday
    * Palladium set to register best week since mid-June

    By Diptendu Lahiri
    Jan 10 (Reuters) - Gold dipped on Friday and was on track
for its first weekly decline in five as easing tensions in the
Middle East rekindled appetite for higher risk assets.
    Spot gold        was down 0.2% at $1,549.90 per ounce by
1211 GMT, having fallen as much as 1% on Thursday to its lowest
since Jan. 3 at $1,539.78. U.S. gold futures        were
0.2%lower at $1,550.90 per ounce.
    "There has been a spike in risk appetite among investors
after tensions between the United States and Iran eased. That,
along with a strong dollar, is weighing on gold," said
Quantitative Commodity Research consultant Peter Fertig.
    World stocks were on track for new highs, driven by the thaw
in U.S.-Iran tensions.                        
    Further boosting risk sentiment, the U.S. House of
Representatives on Thursday passed a resolution to stop U.S.
President Donald Trump from further military action against
Iran.             
    The dollar        was set to post its best week in two
months, making gold more expensive for holders of other
currencies.       
    Gold, often considered a safe investment during political
and economic turmoil, surged above $1,600 on Wednesday after
Iran launched missile strikes on U.S. forces in retaliation for
the killing of its top commander in a drone attack.             
    On the trade front, a "Phase 1" trade deal between
Washington and Beijing could be signed shortly after Jan. 15,
Trump said on Thursday.             
    "Fundamentals for gold are turning a little bit less
supportive, as no one knows about the U.S. Federal Reserve's
next move and the trade optimism is kind of helping the global
economy gather steam," Fertig said. 
    Central bank monetary strategy will be a key driver for gold
going forward, he added. Lower interest rates reduce the
opportunity cost of holding non-yielding bullion. 
    Investors are now awaiting U.S. non-farm payrolls due at
1330 GMT for further clues on the health of the world's largest
economy.
    "A break of $1,540 implies that a deeper correction to
$1,520 could occur," Jeffrey Halley, senior market analyst,
OANDA said in a note.
    Indicative of sentiment, holdings of the world's largest
gold-backed exchange-traded fund, SPDR Gold Trust      , fell
0.5% to 882.12 tonnes on Thursday.          
    Elsewhere, palladium        was up 0.8% at $2,123.62 per
ounce, having hit a record peak of $2,149.50 in the previous
session on supply constraints. The metal was still on track for
its biggest weekly rise since mid-June, up nearly 7% so far.
    Silver        was little changed at $17.91 per ounce, but
was on track for its first weekly decline in five. Platinum
       rose about 1% to $975.66 per ounce. 

 (Reporting by Diptendu Lahiri in Bengaluru; Editing by Jan
Harvey and Jane Merriman)
  
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