October 20, 2017 / 10:54 AM / a year ago

PRECIOUS-Gold falls as hopes of U.S. tax reform boost riskier assets

    * U.S. Senate vote clears hurdle for Trump tax cuts
    * Dollar, U.S. bond yields rise
    * Gold down 1.9 pct this week

 (Updates prices; adds comment, byline, NEW YORK dateline)
    By Renita D. Young and Peter Hobson
    NEW YORK/LONDON, Oct 20 (Reuters) - Gold prices fell on
Friday after the U.S. Senate approved a budget blueprint that
paves the way for tax cuts, causing  stocks, the dollar and bond
yields to rise.
    The Republican-controlled Senate voted by 51-to-49 late on
Thursday for the measure, clearing a hurdle for tax cuts that
would add up to $1.5 trillion to the federal deficit over the
next decade.             
    Investors betting on faster economic growth as a result
bought riskier assets while bond holders reduced their positions
on worries that inflation and federal borrowing could rise.
    U.S. Treasury yields rose further Friday afternoon,
reversing a modest pullback after a White House official said
Federal Reserve Chair Janet Yellen was in the White House for
lunch with U.S. President Donald Trump's economic adviser Gary
    Trump could announce his choice for the next chair of the
U.S. central bank as early as next week after he interviewed
five candidates including Yellen.                            
    A report on Thursday suggested Trump was leaning towards Fed
Governor Jerome Powell, perceived as a less hawkish candidate.
    Higher bond yields increase pressure on bullion because gold
does not offer a yield, while a stronger dollar makes it more
expensive for holders of other currencies. 
    Investors may also see tax cuts as a cause for higher U.S.
interest rates, said INTL FCStone analyst Edward Meir. Higher
rates would push up bond yields and the dollar.
    Spot gold        was down 0.77 percent at $1,279.44 an ounce
by 2:41 p.m. EDT (1841 GMT), down about 1.9 percent on the week.
    U.S. gold futures         for December delivery settled down
$9.50, or 0.7 percent, at $1,280.50 per ounce, 1.8 percent lower
on the week.
    The net long position of money managers in Comex gold has
fallen from a peak in early September but is still elevated.
    "Right now, you could see a lot of open interest being
abandoned if we don't have another big move (in gold) next
week," said George Gero, managing director of RBC Wealth
Management in New York.
    The European Central Bank is expected to say on Oct. 26 it
will start trimming its monthly asset purchases to 40 billion
euros from 60 billion euros in January, a Reuters poll showed.
    In other precious metals, silver        was down 1 percent
at $17.02 an ounce, taking its fall this week to around 2
    Platinum        was down 0.3 percent at $918.50 an ounce and
palladium        was up 1.5 percent at $972.80 per ounce. Both
metals were down on the week.

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
David Evans and James Dalgleish)
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