May 18, 2018 / 10:50 AM / 6 months ago

PRECIOUS-Gold rebounds as dollar eases on Italian political tensions

    * Spot gold down nearly 2 pct for the week
    * Dollar index hits fresh five-month high, then eases 
    * Benchmark U.S. yields near 7-year peak
    * Italian political tensions drive gold safe-have bids

 (Recasts; updates prices, headline; adds comment, second
byline, NEW YORK to dateline)
    By Renita D. Young and Eric Onstad
    NEW YORK/LONDON, May 18 (Reuters) - Gold prices rebounded on
Friday, as the U.S. dollar eased after Italian political tension
sparked a sell-off in the country's bond markets and investors
sought a safe haven in bullion.
    Spot gold        gained 0.2 percent at $1,292.12 per ounce
by 1:33 p.m. EDT (1733 GMT), after hitting its lowest since Dec.
27 in the previous session at $1,285.41.
    The metal was heading for its biggest weekly decline since
early December, down nearly 2 percent versus last week.
    U.S. gold futures         for June delivery settled up
$1.90, or 0.2 percent, at $1,291.30 per ounce.
    "Gold got stronger off Italian geopolitics and the sell-off
in Italian bond markets," said Josh Graves, senior commodities
strategist at RJO Futures.
    The demands of populist parties likely to form Italy's next
government, which promised to ramp up spending, caused Italian
investors to flee bond markets and purchase gold.             
    "A debt crisis in Italy would have a far bigger impact than
one in Greece. Gold would profit as a result," Commerzbank
analysts said in a note.
    This caused more volatility in global equities, which also
provided gold support, Graves added.                         
    Earlier, the sentiment index in gold was indicating it was
strongly oversold while the dollar was heavily overbought as
U.S. inflation measures were rising, said Gianclaudio Torlizzi,
partner at consultancy T-Commodity in Milan.
    Thursday data showed a tightening U.S. labor market and  
mid-Atlantic factory activity picking up, bolstering
expectations the Federal Reserve will raise interest rates next
month.             
    "We think there is room for a strong rally into the summer
and we have a gold target of $1,430 by August," Torlizzi said.
    The dollar index        earlier rose to a fresh five-month
peak as the benchmark U.S. Treasury yield             hit the
highest in nearly seven years.         
    A stronger greenback makes dollar-denominated gold more
expensive for users of other currencies, while higher U.S.
yields dampen the appeal of non-yielding bullion.   
    Spot gold is still expected to hit $1,302 per ounce as it
has stabilized around a support at $1,287, Reuters technical
analyst Wang Tao said.             
    Spot silver        fell 0.4 percent to $885.40 an ounce, on
track to shed slightly more than 1 percent for the week.
    Platinum        dropped 0.4 percent to $885.40 per ounce
after hitting a five-month low of $876.50. Platinum was set to
fall around 4 percent on the week, the biggest weekly loss since
early December.
    Palladium        declined 1.2 percent to $966.30 per ounce,
earlier hitting a two-week low at $960.22 and was heading for a
nearly 3 percent weekly loss.

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
Adrian Croft, Jon Boyle and Richard Chang)
  
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