April 25, 2018 / 10:23 AM / 4 months ago

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

    * Dollar index touches four-month high
    * Palladium, platinum and silver fall
    * GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl

 (Recasts throughout; updates prices; adds comment, second
byline, NEW YORK to dateline)
    By Renita D. Young and Zandi Shabalala
    NEW YORK/LONDON, April 25 (Reuters) - Gold slumped to a
five-week low on Wednesday as the dollar jumped and U.S.
Treasury yields continued to rise on signs of U.S. economic
strength and an easing in the U.S.-China trade conflict.
    The benchmark U.S. 10-year Treasury yield breached 3 percent
on Tuesday for the first time in more than four years and
remained above that level on Wednesday as jitters about growing
federal borrowing spurred selling of U.S. government bonds.
            
    Higher yields on bonds make gold a less attractive
investment because it pays no interest.      
    "On a technical level, people have been watching it for a
long time. Yields have been trending lower for multiple decades
really, so some have argued in the marketplace that we are right
up on the cusp of a regime shift," said TD Securities
commodities strategist Daniel Ghali.
    Spot gold        was down 0.66 percent at $1,321.56 per
ounce by 1:56 p.m. EDT (1756 GMT). It touched a session low of
$1,318.51, the lowest level since March 21. 
    U.S. gold futures         for June delivery settled down
$10.20, or 0.8 percent, at $1,322.80 per ounce. 
    The dollar index        rose to a four-month high against a
basket of currencies.       
    World stocks were down for a fifth straight session on
Wednesday.            
    Meanwhile, political risk declined after the United States
said it would likely reach a trade agreement with China and that
officials from both sides would sit down for negotiations in a
few days.             
    "There is a bit more confidence in the U.S. and that
negatively affects gold," said Natixis precious metals analyst
Bernard Dahdah.
    Gold is often seen as a store of value during times of
political and financial uncertainty.
    "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," said
Stephen Innes, APAC trading head at OANDA.
    But investor appetite climbed as gold-backed exchange-traded
funds (ETFs) holdings rose to the highest level since 2013.
              
    "As the Goldilocks market environment draws to a close,
investor interest in gold has picked up," TS Lombard said in a
note, referring to an economy that is not so hot that it causes
inflation, and not so cold that it causes a recession.
    Meanwhile, spot silver        dropped 0.9 percent to $16.56
an ounce after touching $16.49, near a two-week low. Platinum
       lost 1.7 percent to $910.20 an ounce after earlier
hitting $903.50, near a three-week low.
    Palladium        fell 0.22 percent to $972.4 an ounce after
touching $956.10 earlier, a two-week low.

 (Additional reporting by Swati Verma in Bengaluru
Editing by Adrian Croft and Paul Simao)
  
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