June 4, 2018 / 10:17 AM / 15 days ago

PRECIOUS-Gold firms as dollar wilts; U.S. rate view curbs gains

    * Gold holds in range after falling 0.6 pct last week
    * Money manager net platinum short hits record levels -ING
    * GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices)
    By Jan Harvey
    LONDON, June 4 (Reuters) - Gold edged higher on Monday,
supported by a retreat in the dollar as Italian political risk
receded, though the prospect of another rise in U.S. interest
rates kept a lid on gains.
    The metal fell on Friday after stronger than expected U.S.
payrolls data shored up expectations that the U.S. Federal
Reserve would press ahead with another rate increase at its June
meeting.
    Gold is highly sensitive to rising interest rates, which
lift the opportunity cost of holding non-yielding bullion. They
also boost the dollar, in which the metal is priced.  
    Spot gold        was up 0.3 percent at $1,296.60 an ounce by
1205 GMT, while U.S. gold futures         for August delivery
rose by 0.1 percent to $1,300.60.
    The interest rate cycle in the United States is outweighing
other factors for the moment, said Julius Baer analyst Norbert
Rucker. 
    "Investment demand for gold is just not strong enough to
lift the price sustainably," he said. "Near term, the U.S.
interest rate hiking cycle is driving prices, and everything
that goes along with that - a rising dollar, the interest rate
differential with the euro zone." 
    The euro eroded some of last month's hefty losses to bounce
0.7 percent against the dollar on Monday as political tensions
eased in Italy.        
    Stock markets also strengthened as worries over a potential
trade war between the United States and other major economies
was overshadowed by a retreat in political risk in Europe and
strong U.S. jobs data.            
    Finance leaders of the closest U.S. allies vented anger over
the Trump administration's metal import tariffs on Saturday.
Gold has struggled to capitalise on the trade stand-off,
however, with attention shifting to the outlook for U.S.
interest rates.             
    Speculators raised their net long position in COMEX gold
contracts to the strongest level since late April in the week to
May 29, at 61,235, U.S. Commodity Futures Trading Commission
(CFTC) data showed on Friday.        
    However, gold-backed exchange-traded funds registered
outflows later in the week, suggesting that investment appetite
was softening. Holdings of the largest gold ETF, U.S.-listed
SPDR Gold Sharees, fell by 10.6 tonnes on Friday, its biggest
one-day outflow in nearly four months. 
    In other precious metals, silver        was up 0.5 percent
at $16.44 an ounce, while platinum        rose 0.9 percent to
$907.20 and palladium        gained 0.8 percent to $1,007.80.
    Money manager short positions, or bets on falling prices, on
CME platinum contracts hit record highs in the week to last
Tuesday, ING said in a note. 
    "Open interest continued to rise as prices fell last week, 
suggesting the shorting continues, but at these levels we would
soon expect some support from short-covering/profit-taking," it
said. 

    
 (Additional reporting by Karen Rodrigues in Bengaluru
Editing by Adrian Croft and David Goodman)
  
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