January 18, 2018 / 11:20 AM / 7 months ago

PRECIOUS-Gold flat but under pressure as U.S. Treasury yields rise

    * Spot gold could fall to $1,250 by mid year -Julius Baer
    * Falling digital currencies could support gold -analysts
    * Spot gold vs bitcoin: reut.rs/2DgiRiK
    * 10-year U.S. Treasury yields at highest since March

 (New throughout, updates prices, market activity and comments,
adds second byline and NEW YORK dateline)
    By Renita D. Young
    NEW YORK/LONDON, Jan 18 (Reuters) - Gold was flat in a
narrow range on Thursday, first dipping as the dollar rose and
then rising as the dollar moved lower, but bullion's gains were
limited by higher U.S. Treasury yields.
    Financial market players were concerned about a possible
U.S. government shutdown, but this did not move gold very much.
    Spot gold        was unchanged at $1,327.61 an ounce by 1:49
p.m. EST (1849 GMT). Earlier in the session, it touched its
lowest since Jan. 12 at $1,323.70.
    U.S. gold futures         for February delivery settled down
$12, or 0.9 percent, at $1,327.20 per ounce. 
    In the previous session, spot gold fell 0.8 percent, its
biggest daily percentage decline since Dec. 7 as the U.S. dollar
bounced from three-year lows.   
    "We’ve seen the relationship between dollar and gold hold
pretty steady," said Chris Gaffney president of world markets at
St. Louis-based EverBank.
    In early trade, the U.S. dollar index        fell on worries
over a possible U.S. government shutdown as global investors
sought to diversify their holdings into other currencies.
Shortly after, the greenback recovered some of the losses.
                      
    The 10-year U.S. Treasury yield hit its highest since March
2017 at 2.61 percent             in European trade, pushing euro
zone counterparts higher.              Gold is a non-yielding
asset so rising yields on the bond market pressure its price.
    "I think you'll also see yields rising with interest rates,"
pressuring gold, added Mike O’Donnell,  market strategist RJO
Futures in Chicago. 
    Spot gold is expected to fall to $1,311 per ounce, as it has
broken a support at $1,329, according to Reuters technical
analyst Wang Tao.         
    Some analysts said gold could draw some support from the
current correction in digital currencies.
    "Brokers in Europe report investors have increasingly been
asking about switching from cryptocurrencies into gold," ANZ
analysts said in a research note.
    Bitcoin            fell as much as 20 percent on Wednesday,
dropping below $10,000 due to investor fears that regulators
could clamp down.             
    
    In other precious metals, silver        gained 0.3 percent
at $16.96 per ounce and palladium        shed 1.2 percent at
$1,101.99.
    Platinum        added 0.57 percent at $1,002.40 per ounce,
after touching its highest since Sept. 8 at $1,007.60 in the
previous session. 
    Over the past 15 years, platinum has largely moved higher in
January and February due to seasonally weaker supply from top
producer South Africa, Menke said.
    "This seasonal rebound is playing out. And there is also
some more room from short covering from the futures market."

    
 (Additional reporting by Nallur Sethuraman and Nithin Prasad in
Bengaluru; Editing by David Gregorio and Jane Merriman)
  
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