May 21, 2018 / 12:23 PM / a month ago

PRECIOUS-Gold hits 2018 low as trade comments lift stocks, dollar

    * Dollar index climbs to five-month high
    * GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices; adds comment, byline, NEW YORK to dateline)
    By Renita D. Young and Jan Harvey
    NEW YORK/LONDON, May 21 (Reuters) - Gold on Monday marked a
new low for the year to date after U.S. Treasury Secretary
Steven Mnuchin's declaration that a trade war between China and
the United States was "on hold" helped boost appetite for
higher-risk assets, such as stocks.
    Buoyancy in U.S. Treasury yields also weighed on appetite
for non-interest-bearing assets, like bullion, analysts said.
           
    Spot gold        fell to its lowest since late December at
$1,281.76 an ounce, and was down 0.03 percent at $1,291.1 per
ounce by 1:34 p.m. EDT (1734 GMT). U.S. gold futures         for
June delivery settled down 40 cents, or 0.03 percent, at
$1,290.90 per ounce. 
    "The dollar's riding high and the 10-year (Treasury note's)
yield has broken above 3.05 percent for the first time since
2011," said Mitsubishi analyst Jonathan Butler.       
    A stronger dollar makes assets priced in the U.S. greenback
more expensive for holders of other currencies, while a bounce
in yields had added to pressure on gold. 
    "With the China trade news, international investors sold off
gold," said Michael Matousek, head trader at U.S. Global
Investors.
    The world's two largest economies stepped back from the
brink of a global trade war and agreed to hold further talks
aimed at boosting U.S. exports to China.             
    Gold prices last week fell below the
psychologically-important level of $1,300 an ounce, and posted
the first weekly close below the 200-day moving average since
late December.
    The yellow metal is also being weighed down by expectations
that the Federal Reserve will lift U.S. interest rates again
next month. Higher interest rates make non-yielding assets like
gold less attractive to investors.
    Naeem Aslam, chief market analyst at Think Markets, said
investors were now looking ahead to this week's meeting of the
Federal Open Market Committee, which sets rates. 
    "If the Fed doesn't tame its hawkish stance, we would expect
more weakness in the gold price," he said.
    Mitsubishi's Butler said gold could benefit from safe-haven
buying in the long run if that exuberance loses steam and
inflation pressures mount. But he added: "It's possible that we
might see a further correction in the very short term. That will
of course depend on the newsflow, and whether the dollar can
hold on to its gains."
    Meanwhile, platinum        gained 1.9 percent at $899.50 an
ounce, after also marking a fresh low for the year in earlier
trade at $873.50.
    Silver        was up 0.4 percent at $16.49 an ounce, while
palladium       , the most industrial of the major precious
metals, jumped 2.9 percent to $990.72.

    
 (Additional reporting by Apeksha Nair in Bengaluru; editing by
Adrian Croft and G Crosse)
  
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