June 14, 2018 / 10:49 AM / 4 months ago

PRECIOUS-Gold hits one-month high on ECB decision, trade tensions

    * Silver climbs to near two-month peak
    * ECB to keep rates steady through next summer
    * U.S.-China trade concerns support bullion

 (Updates prices; adds comment, second byline, NEW YORK to
dateline)
    By Renita D. Young and Maytaal Angel
    NEW YORK/LONDON, June 14 (Reuters) - Gold prices rose to a
one-month high on Thursday after the European Central Bank (ECB)
pledged to keep interest rates steady through the summer of 2019
and investors fretted over weak Chinese data.
    The precious metal's upside, however, was capped by a firmer
dollar and a slightly more hawkish U.S. Federal Reserve. 
    Spot gold        gained 0.3 percent at $1,303.70 per ounce
by 1:32 p.m. EDT (1732 GMT) after peaking at $1,309.30.
    U.S. gold futures         for August delivery settled up $7,
or 0.5 percent, at $1,308.30 per ounce.
    The ECB said it would end its unprecedented bond purchase
scheme by the close of the year, but signaled that this would
not mean rapid policy tightening in the coming months.
            
    "The ECB ... has now delivered an intrinsically hawkish
announcement (i.e., the end of QE) in a dovish tone," Luigi
Speranza, head of European market economics at BNP Paribas, said
in a note.
    Higher interest rates generally depress the price of gold, a
non-interest bearing asset.
    The ECB move sent the euro down while the dollar index
extended its gains as U.S. retail sales posted their strongest
rise in six months, supporting the view the Fed would raise
short-term interest rates further.                    
    On Wednesday, the Fed lifted key overnight borrowing costs
by a quarter percentage point. It also projected two more rate
increases by the end of this year, compared to one previously.
            
    A stronger greenback typically makes dollar-priced gold more
expensive for non-U.S. investors.
    But gold got a boost after China said it was ready to
respond if U.S. President Donald Trump activated tariffs on
Chinese goods.             
    "Trade tensions ... are supportive for gold but having said
that we don't think the upside is open because there are
headwinds coming from the global recovery ... and the fact that
the Fed is more hawkish," said Societe Generale analyst Robin
Bhar.
    Inflation worries also lent support, said Michael Matousek,
head trader at U.S. Global Investors. As production costs rise
with inflation, companies have less profits to allocate toward
employees, so wages are not growing much, he explained.
    "(Investors) are purchasing gold, because they can
understand it, as opposed to not understanding why that wage
inflation is not going up more," Matousek said.
    Silver        climbed 1.4 percent to $17.24 an ounce, after
hitting $17.32 an ounce, its highest since April 19.
    Platinum        rose 0.6 percent to $904.50 an ounce after
touching a two-week high of $912.80, while palladium       
gained 0.2 percent at $1,010.90.

 (Additional reporting by Eric Onstad in London, Karen Rodrigues
and Swati Verma in Bengaluru; Editing by Adrian Croft and
Richard Chang)
  
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