November 8, 2017 / 11:48 AM / a year ago

PRECIOUS-Gold gains on possible delays in U.S. tax cut plan

    * GRAPHIC-Gold/silver ratio:
    * GRAPHIC-2017 asset returns:

 (Updates prices)
    By Zandi Shabalala
    LONDON, Nov 8 (Reuters) - Gold touched a near three-week
high on Wednesday as the dollar eased on expectations of
possible delays in long-awaited U.S. tax reforms while palladium
hit its highest since 2001.
    Spot gold        was up 0.7 percent at $1,283.80 per ounce
as of 1530 GMT. It fell about 0.5 percent on Tuesday.
    U.S. gold futures         for December delivery gained 0.5
percent to $1,281.90 an ounce.
    Senate Republican leaders are considering a one-year delay
in implementing the centrepiece tax cut to comply with Senate
rules, the Washington Post reported on Tuesday, citing sources.
    This pulled the dollar index       , which measures the
greenback against a basket of six currencies, down 0.1 percent
and towards the 3-1/2 month lows touched in recent weeks.
    Societe Generale analyst Robin Bhar said the news of a
potential delay could mean a moderation in interest rate
increases next year which would boost the appeal for gold.
    "The December rate hike is baked in but the market is 
looking more forward on interest rates into 2018. If the tax
cuts are delayed then the U.S. Federal Reserve can be a bit more
relaxed," Bhar said.
    Gold is sensitive interest rates, particularly in the United
States, as higher rates lift the opportunity cost of holding
non-yielding assets and boost the dollar, in which it is priced.
    "The closer we get to the interest rate hike in December the
lower the price of gold should get," said Natixis precious
metals analyst Bernard Dahdah.
    In physical demand, industry officials and analysts warned
that India's gold imports in the last quarter of 2017 could drop
25 percent from a year ago due to weak demand during key
festivals and as investors seek better returns from riskier
assets such as equities.
    MKS analyst Alex Thorndike said $1,280-85 level remains the
ceiling for gold prices at the moment.
    In other precious metals, palladium        broke through the
$1,000 level to hit its highest since 2001 at $1,012 per ounce,
up nearly 2 percent.
    The metal, mostly used for auto catalysts to clean pollution
from exhaust fumes, has rallied on an expected supply deficit
and higher demand in the car market.    
    "Palladium's got very good fundamentals and platinum not so
good and that is keeping the discount between the two as wide as
we have ever seen," Bhar said.
    Meanwhile, silver        gained 0.7 percent to $17 an ounce
while platinum        was up 1 percent at $932 an ounce.    

 (Additional reporting by Vijaykumar Vedala in Bengaluru,
editing by Louise Heavens and David Evans)
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