May 31, 2018 / 10:38 AM / in 20 days

PRECIOUS-Gold flat despite weaker dollar as Italy jitters fade

    * Gold headed for second straight monthly decline
    * Silver, platinum, palladium set for monthly gains

 (New throughout, updates prices, market activity and comments;
adds second byline and NEW YORK dateline)
    By Renita D. Young and Maytaal Angel
    NEW YORK/LONDON, May 31 (Reuters) - Gold prices were flat on
Thursday even though the U.S. dollar rally lost steam, as safe
haven bids for bullion declined after political tensions in
Italy eased, which also lifted the euro.
    "The situation in Italy is fading. We're not seeing much of
a safe haven bid for gold," said Chris Gaffney, president of
world markets at EverBank. 
    Italy's two anti-establishment parties renewed attempts to
form a government and avoid snap elections that investors fear
would serve as a quasi-referendum on Rome's membership of the
euro zone.             
    Spot gold        was flat at $1,300.66 ounce by 2:07 p.m.
EDT (1807 GMT). It was down nearly 1 percent for the month,
headed for its second straight monthly decline.
    U.S. gold futures         for June delivery were also
essentially flat, settling down just $1.40, or 0.1 percent, at
$1,300.10 per ounce. 
    Gold got an early boost as the dollar fell for a second day
versus the euro, making dollar-priced gold cheaper for non-U.S.
investors. Italian bonds and European equities posted a second
day of gains.                   
    Escalating trade tensions also supported gold, traders said.
    Washington will announce plans to slap tariffs on EU steel
and aluminum imports, sources said. The EU has said it does not
want a trade war but will respond if Washington imposes tariffs.
            
    China said on Wednesday it was ready to fight back if
Washington was looking for a trade war.             
    Tariffs "would definitely reduce risk appetite, and gold
will benefit from this," said Bart Melek, head of commodity
strategy at TD Securities.
    Investors also awaited U.S. employment data coming on
Friday. "We're still focused on wage growth to see if we'll see
any kind of wage inflation," EverBank's Gaffney said. "Even with
the labor market as strong as we've seen it, we're just not
seeing that bleed over into wages."
    Signs of inflation often encourage investors to buy gold,
but higher wage growth would give the U.S. Federal Reserve more
incentive to hike interest rates. This could dent the appeal of
gold, which does not bear interest.
    Meanwhile, spot silver        declined 0.3 percent at $16.46
an ounce, but was on track for a monthly rise of about 1
percent, its biggest since January. 
    Platinum        gained 0.1 percent at $907.40 per ounce,
headed for a 0.5 percent monthly increase.
    Palladium        increased 0.2 percent at $987.50 an ounce
and was headed for its biggest monthly gain since December,
climbing over 2 percent.

 (Additional reporting by Karen Rodrigues in Bengaluru; Editing
by David Gregorio and Mark Potter)
  
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