October 12, 2018 / 10:23 AM / 2 months ago

PRECIOUS-Gold pulls back from two-month highs as stocks rebound

* Spot gold on track for biggest weekly gain in seven

* Could extend gains to $1,237/oz -technicals

* Palladium off eight-month highs hit on Thursday (Updates prices, adds comment.)

By Sethuraman N R

BENGALURU, Oct 12 (Reuters) - Gold fell on Friday, retreating from two-month highs hit in the previous session, as global equity markets recovered some poise after dramatic losses.

Spot gold was down 0.4 percent at $1,219.38 an ounce by 1416 GMT, having jumped about 2.5 percent on Thursday as an equities sell-off steered investors towards safe-haven assets. Thursday’s peak of $1,226.27 was the highest since July 31.

U.S. gold futures were down 0.2 percent at $1,224.60 an ounce.

Spot gold has risen about 1.5 percent this week, on track for its biggest weekly gain in seven weeks.

“Event-driven rallies usually don’t last long,” said George Gero, managing director at RBC Wealth Management, adding that a rebound in equities was one of the main factors weighing on gold.

“You still have headwinds coming from the U.S. Federal Reserve rate hike and a possible rebound in the dollar. We need more (ammunition) for gold to move further as it has been very well abandoned with only a few central banks buying besides some retail buyers.”

Shares worldwide were set for their biggest daily gains in nearly a month on Friday as European and Asian markets recovered from a days-long sell-off that left them set for their worst week since February.

Despite gold’s sharpest one-day percentage gain since June 2016 on Thursday, the precious metal is still down about more than 10 percent from its April peak, with investors buying dollars as the U.S.-China trade war unfolds against a backdrop of rising U.S. interest rates.

“We could see some bounces like this as the futures market is extremely short,” said Macquarie commodity strategist Matthew Turner. “But, ultimately, prices are going to drift down ... The fundamentals for gold are still weak.”

Thursday’s surge helped bullion break above the narrow trading range it has been stuck in for the past 1-1/2 months.

On the technical front, spot gold could extend gains to $1,237 an ounce, as suggested by a Fibonacci ratio analysis, said Reuters technical analyst Wang Tao.

“Gold is trading fairly close to the 100-day moving average at $1,228. There should be plenty of resistance, but a close above that level could signal a move higher,” MKS PAMP Group traders said in a note.

In other precious metals, palladium was up 0.2 percent at $1,079, still shy of the previous session’s peak of $1,096.80, its highest since Jan. 26.

Silver rose 0.6 percent to $14.64 and platinum was down 0.2 percent at $836.50. (Reporting by Nallur Sethuraman in Bengaluru Editing by David Goodman and Adrian Croft)

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