May 30, 2018 / 5:52 PM / 3 months ago

PRECIOUS-Gold gains on U.S. growth data with lingering Italy uncertainty

    * Dollar falls from 6-1/2 month peak
    * Italy crisis sparks stock sell-off
    * GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices, headline; adds comment, second byline, NEW
YORK to dateline)
    By Renita D. Young and Zandi Shabalala
    NEW YORK/LONDON, May 30 (Reuters) - Gold prices edged higher
on Wednesday as the dollar wilted after U.S. data showed the
U.S. economy slowed slightly more than initially expected in the
first quarter while political uncertainty lingered in Italy.
    U.S. gross domestic product increased at a 2.2 percent
annual rate, the Commerce Department said in its second estimate
of first-quarter GDP, instead of the previously reported 2.3
percent pace.             
    The news knocked the dollar        lower against a basket of
leading currencies, away from near 6-1/2 month highs. A weaker
greenback makes dollar-denominated gold cheaper for holders of
other currencies.
    "This has supported the EUR/USD exchange rate, which in turn
has underpinned the price of the positively-correlating yellow
precious metal," said Forex.com analyst Fawad Razaqzada.
    Spot gold        was up 0.32 percent at $1,302.17 per ounce
by 1:32 p.m. EDT (1732 GMT), while U.S. gold futures         for
June delivery settled up $2.50, or 0.2 percent, at $1,301.50 per
ounce. 
    Though gold prices edged higher, easing concerns of
political strife in Italy dented the appeal for safe haven gold
purchases, said Rob Haworth, senior investment strategist for US
Bank Wealth Management.
    "Today we're still following the dollar and gold will
probably be under pressure if Italian politics sorts itself out
over the next day or two," Haworth said.
    Meanwhile, Italy searched for a last-minute exit from almost
three months of political turmoil, with its biggest party
looking to make a renewed attempt to form a coalition government
with the right-wing League.             
    Analysts said some uncertainty still remained over Italy
even as a resolution was being sought.
    "I don’t see any market-pleasing resolution to be honest,
because a new caretaker government will not last long because it
doesn’t not have any majority in parliament," said Commerzbank
commodity analyst Carsten Fritsch. 
    U.S. benchmark 10-year Treasury yields       on Tuesday
registered their largest one-day drop since Brexit nearly two
years ago. Higher rates generally dent demand for
non-interest-paying gold.
    China on Wednesday lashed out at Washington's unexpected
statement that it is sticking to the threat of imposing tariffs
on $50 billion of Chinese goods, saying Beijing was ready to
fight back in any trade war.             
    But Capital Economics' Simona Gambarini said the potential
trade war between China and the United States was mostly priced
into gold, which would need an escalation or resolution to
become a catalyst to prices again.
    Meanwhile, spot silver        was up 0.9 percent at $16.53
an ounce.
    Platinum        rose 0.5 percent at $908.60 an ounce, while
palladium        gained 0.2 percent at $981.22.

 (Additional reporting by Karen Rodrigues in Bengaluru
Editing by Mark Heinrich and Cynthia Osterman)
  
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