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PRECIOUS-Gold falls on pressure from stronger dollar, rate hikes in focus
November 20, 2017 / 2:57 PM / 20 days ago

PRECIOUS-Gold falls on pressure from stronger dollar, rate hikes in focus

    * German politics boost dollar against euro
    * Prospect of higher U.S. rates creates headwind for gold
    * Norilsk to boost palladium purchases from central bank

 (Recasts, updates prices; adds background, datelines, second
byline)
    By Marcy Nicholson and Pratima Desai
    NEW YORK/LONDON, Nov 20 (Reuters) - Gold fell more than 1
percent on Monday, giving up the prior session's gains on
pressure from the rising dollar, expectations for U.S. interest
rate hikes and as the market entered a holiday week.
    Spot gold        was down 1.4 percent at $1,275.66 an ounce
by 2:38 p.m. EST (1938 GMT), off Friday's peak of $1,297, its
strongest since Oct. 16. U.S. gold futures         settled down
1.6 percent at $1,275.30. 
    The U.S. dollar        touched its highest against a basket
of major currencies in nearly a week, as the euro       
weakened amid political risks linked to German Chancellor Angela
Merkel's failure to form a three-way coalition government.
                   
    Global equities rose as confidence over economic growth
around the world helped investors brush off concerns about the
collapse of government talks in Germany.            
    "This reversal is not terribly surprising because you've
entered a holiday week and didn't make much progress in that
breakout," said Rob Haworth, senior investment strategist at
U.S. Bank Wealth Management, referring to the U.S. Thanksgiving
holiday on Thursday and failure to extend the Nov. 17 rally to a
one-month high.
    "The dollar is strengthening ... and the odds of a rate
increase are starting to rise. I think we've priced in December
and you're starting to price in two or three next year." 
    The prospect of higher U.S. interest rates when the Federal
Reserve meets in December helped the dollar against other major
currencies such as the yen       .             
    Goldman Sachs said it expects a tight U.S. labor market and
more normal inflation picture will lead the Fed to hike interest
rates four times next year.             
    "For gold, there are headwinds in the guise of U.S. interest
rate rises, which means higher front-end bond yield curves and
an opportunity cost for holding gold," said Societe Generale
analyst Robin Bhar.
    Higher rates typically mean sales of short-dated bonds,
pushing up yields and make them cheaper for other investors,
offering higher returns than gold which earns nothing and costs
money to store and insure.
    Silver        was down 2.3 percent at $16.91 an ounce and
platinum        fell 3 percent to $922.30.
    Palladium        eased 0.5 percent to $988.50 an ounce.
    Traders said palladium could come under pressure from news
that Norilsk Nickel           is planning to boost purchases of
palladium for its fund from Russian central bank reserves to
help ease shortages in the market.
    An executive at Norilsk, the world's largest palladium
producer, told Reuters that purchases in 2017 would rise to as
much as 600,000 ounces. This compares with about five tonnes
(160,764 ounces) last year.             
    

 (Additional reporting by Vijaykumar Vedala in Bengaluru;
Editing by Mark Potter and Chizu Nomiyama)
  

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