April 25, 2018 / 4:13 AM / 7 months ago

PRECIOUS-Gold falls on strong dollar, higher U.S. yields

    * Dollar index up 0.4 percent
    * Palladium down for a third straight day

 (Adds analyst comment, details and updates prices)
    By Swati Verma
    BENGALURU, April 25 (Reuters) - Gold prices dropped on
Wednesday as benchmark U.S. bond yields poked above the 3
percent level and lifted the dollar to its highest in more than
three months.
    Spot gold        was down half-a-percent at $1,323.59 per
ounce, as of 0759 GMT. The yellow metal rose 0.5 percent on
Tuesday to break a three-session losing streak.
    U.S. gold futures         dropped 0.6 percent to $1,325 per
ounce.
    Higher interest rates tend to boost the dollar and push up
bond yields, putting pressure on the greenback-denominated gold.
     
    The dollar index       , which measures the greenback
against a basket of currencies, rose 0.4 percent to 91.117, its
strongest since Jan. 12.       
    "The strength of the dollar index and rising Treasury yield
confirm that the Fed's hawkish stance is not going to change
anytime soon," Naeem Aslam, chief market analyst, Think Markets.
    "However, I do believe that with sell-off in the equity
market, investors would have to put their money (elsewhere). The
safe-haven gold would attract that money flow," Aslam said.
    Asian shares fell on Wednesday as a rise in U.S. bond yields
above 3 percent and warnings from bellwether U.S. companies of
higher costs drove fears that a boom in corporate earnings may
be near its peak.                       
    "When the equity walls come crumbling down, gold offers the
best support," said Stephen Innes, APAC trading head, OANDA.
    "As traders put geopolitical and trade risk in the rear-view
mirror for the time being, how the dollar flourishes and wilts
will be the primary driver of near-term gold sentiment," Innes
added.
    Gold is often seen as an alternative investment during times
of political and financial uncertainty.
    Trump said on Tuesday the United States would likely reach a
trade agreement with China and that officials from both sides
would sit down for negotiations in a few days.             
    Meanwhile, North Korean leader Kim Jong Un is due to hold a
summit with South Korean President Moon Jae-In on Friday, and is
expected to meet with U.S. President Donald Trump in late May or
early June.             
    "I think that the downward trend (in gold prices) will
continue for the next few days..." ahead of a meeting between
leaders of North Korea and the South, said Ji Ming, chief
analyst, Shandong Gold Group.
    In other precious metals, spot silver        dropped 0.6
percent to $16.61 an ounce, and platinum        eased 0.4
percent to $922.40 an ounce.
    Palladium        fell for a third straight session, down 0.7
percent at $967.75 an ounce.

 (Reporting by Swati Verma in Bengaluru, Editing by Biju
Dwarakanath and Sherry Jacob-Phillips)
  
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