September 29, 2017 / 10:06 AM / a year ago

PRECIOUS-Gold dips after U.S. inflation data, set for quarterly gain

    * Palladium gains 11.3 pct on quarter, up 38 pct in year so
    * Platinum set for 8.7 percent decline in September
    * Palladium ETF flows:

 (Updates prices; adds comment, byline, NEW YORK dateline)
    By Renita D. Young and Eric Onstad
    NEW YORK/LONDON, Sept 29 (Reuters) - Gold prices edged lower
on Friday as slightly weaker U.S. inflation and consumer
spending data did little to dampen expectations of an interest
rate hike in December.
    Spot gold        was down 0.3 percent at $1,283.61 per ounce
by 2:31 p.m. EDT (1831 GMT). 
    Gold futures for December delivery         settled down
$3.90, or 0.3 percent, at $1,284.80 per ounce, 2.8 percent lower
for September, yet 2.9 percent higher for the quarter.
    Spot gold was on track to decline 3 percent in September,
its largest monthly fall so far in 2017 and the biggest since
November 2016, after the dollar strengthened. 
    However, it was set to end the quarter 3.3 percent higher ,
rallying in July and August, partly due to geopolitical tensions
including North Korea's missile tests.
    U.S. data showed inflation remained benign in August with
the core personal consumption expenditures (PCE) price index
rising 1.3 percent year-on-year, after advancing 1.4 percent in
    Core PCE is the Federal Reserve's preferred inflation
measure and has a 2 percent target.
    Friday's data, however, hardly dimmed prospects of a rise,
with financial markets pricing a roughly 71 percent probability
of a December interest rate hike, compared with 76 percent
earlier, the CME FedWatch tool showed.
    Gold is highly sensitive to rising U.S. interest rates,
which increase the opportunity cost of holding non-yielding
bullion, while boosting the greenback.     
    Looming geopolitical tensions limited gold's losses, added
Bart Melek, head of commodity strategy at TD Securities in
    Meanwhile, palladium        was up 0.8 percent at $936.20
per ounce. It was up 11.3 percent for the quarter and 38 percent
in 2017. 
    Platinum        was down 1.1 percent at $909.74 per ounce.
The metal is set for an 8.7 percent drop for September.
    Palladium traded at a premium to platinum for a third
straight day after prices for the two metals hit parity for the
first time since 2001 on Wednesday.             
    "We have held the view that although palladium would
overtake platinum in the short term, the latter should
ultimately regain its premium," said analyst Joni Teves at UBS. 
    "A rebound in gold would drag platinum higher and is the
most likely trigger for a correction in PGM (platinum group
metals) relative prices in the near term."
    Highlighting investors' bullish attitude to palladium,
exchange-traded fund holdings in the metal                
showed the first quarterly inflow since the second quarter of
    Silver        was down 0.6 percent at $16.73 per ounce and
was on track for a 5.1 percent loss on the month, but end the
quarter 0.6 percent higher.  

 (Additional reporting by Nithin Prasad and Arpan Varghese in
Bengaluru and Jan Harvey in London; editing by Dale Hudson and
Andrew Hay)
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