May 3, 2018 / 2:05 PM / 4 months ago

PRECIOUS-Gold extends gains on Fed meeting and geopolitics

    * Spot gold needs to break above $1,322 -analyst
    * U.S. delegation in Beijing on Thursday and Friday
    * Investors await U.S. non-farm payroll data on Friday

 (Recasts throughout; updates prices; adds comment, byline, NEW
YORK to dateline)
    By Renita D. Young and Eric Onstad
    NEW YORK/LONDON, May 3 (Reuters) - Gold prices gained on
Thursday, one day after the U.S. central bank reassured
investors that increases to interest rates would be gradual and
as the U.S. dollar softened, with geopolitical uncertainties
also providing support.
    Investors are awaiting U.S. jobs data expected on Friday for
a sense of the country's economic performance that could help
influence the U.S. Federal Reserve's pace of increasing interest
rates.
    Spot gold        rose 0.6 percent at $1,312.54 per ounce by
1:33 p.m. EDT (1733 GMT), while U.S. gold futures         for
June delivery settled up $7.10, or 0.5 percent, at $1,312.70 per
ounce. 
    The greenback was little changed, but seeped into negative
territory in a choppy trading session as investors took profits.
                   
    The Fed said inflation on a 12-month basis was "expected to
run near the committee's symmetric 2 percent objective".
            
    The statement showed the Fed will let inflation overshoot,
said Chris Gaffney, president of world markets at EverBank.
"What’s boosted prices is the expectation that inflation will be
allowed to run up a little higher and rates are not going to
chase it."
    Slowing the pace of interest rate increases would be
positive for gold.
    Bullion is highly sensitive to rising U.S. interest rates
because it becomes less attractive compared with
interest-bearing assets.
    Julius Baer economists expect the Fed to shift its guidance
to four rate hikes this year, from three, which will weigh on
gold, said Carsten Menke, commodities analyst at the Swiss bank.
    "Rising rates and a temporarily stronger dollar should bring
sufficient headwinds to push prices below $1,300 over the coming
months," he added. 
    Uncertainties supported bullion, including U.S.-China trade
talks and the potential U.S. withdrawal from the Iranian nuclear
accord.
    "From the geopolitical standpoint, uncertainty, whether it’s
surrounding Iran, elections in Africa or trade wars, doesn’t
translate to strong buying in gold. But we do think it’s
limiting the downside in prices," said Standard Chartered Bank
precious metals analyst Suki Cooper. 
    Gold demand has made its weakest start to a year since 2008,
the World Gold Council said, with stagnant prices and the threat
of rising rates leading investors to seek better returns
elsewhere.             
    Meanwhile, investors anticipate U.S. non-farm payrolls data
on Friday. "Our forecast is they increase. But the key focus is
going to be on wage growth," Cooper added.
    Among other precious metals, spot silver        rose 0.6
percent at $16.45 an ounce, earlier hitting a one-week high at
$16.59. 
    Platinum        climbed 1.1 percent at $899.49 an ounce and
palladium        increased 0.6 percent at $965.

 (Additional reporting by Eileen Soreng in Bengaluru; Editing by
David Goodman and Chizu Nomiyama)
  
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