May 2, 2018 / 12:18 PM / 3 months ago

PRECIOUS-Gold near 4-month low, under pressure from dollar, weak demand

    * Dollar hit a 3-1/2 month high on Tuesday
    * ETF holdings down 10 percent since mid-2016
    * Platinum near December lows

 (Recasts, adds comment, changes dateline from Bengaluru)
    By Pratima Desai
    LONDON, May 2 (Reuters) - Gold steadied on Wednesday near
4-month lows as the dollar's uptrend paused, but prices of the
precious metal are expected to remain under pressure from a
significantly stronger U.S. currency and weak investment demand.
    Spot gold        was up 0.4 percent at $1,309.34 an ounce at
1302 GMT. It touched $1,301.51 on Tuesday, its lowest since Dec.
29. U.S. gold futures         rose 0.2 percent to $1,309.9 an
ounce.
    The U.S. currency hit a 3-1/2 month high on Tuesday. Its
gains makes gold priced in dollars more expensive for holders of
other currencies, which could potentially subdue demand; a
relationship used by funds to generate buy and sell signals from
numerical models.       
    "The dollar's rebound has put pressure on gold and that is
likely to persist," said Julius Baer analyst Carsten Menke.
    "The other problem is a lack of investment demand, which is
surprising given the headwinds to global trade from
protectionism. You can see it in the physically backed gold
products, a primary indicator of safe-haven demand."
    At around 28 million ounces, holdings of the largest
gold-backed exchange-traded-fund (ETF), New York's SPDR Gold
Trust      , are down more than 10 percent since the middle of
2016.
    Protectionism is a reference to U.S. plans to levy taxes on
aluminium and steel imports, which could mean retaliation from
places such as China and the European Union.
    "Rising inflation expectations, an overall bullish commodity
trend (late-cycle preference for commodities), geopolitical and
financial risks are being offset by a rising dollar and rising
real-rates," Saxo Bank analysts said in a note.
    Investors often use gold as a hedge against inflation, which
erodes wealth. Higher interest rates make gold, which earns
nothing and costs money to store and insure, unattractive.
    The U.S. Federal Reserve concludes a two-day meeting on
Wednesday. It is likely to keep interest rates steady, but
encourage expectations of higher rates in June. The Fed is due
to announce its decision at 1800 GMT.             
    On the technical front, support kicks in around $1,305 where
the 200-day moving average sits and resistance at $1,321 near
the 100-day moving average.
    Elsewhere spot silver        rose 1.4 percent to $16.34 per
ounce and palladium        climbed 0.7 percent to $955. 
    Platinum        was up 0.6 percent at $895 an ounce after
hitting $888.50 on Tuesday, its lowest since December.
    Platinum is used in autocatalysts, mainly for diesel cars,
where demand has been sliding after the Volkswagen            
emissions scandal.
    "Sales of diesel cars in Europe's five biggest markets -
Germany, UK, France, Italy and Spain - accounted for 37 percent
of the total in April," Menke said. "This is down eight
percentage points year-on-year."

 (Editing by Mark Potter)
  
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