February 26, 2018 / 12:57 PM / 10 months ago

PRECIOUS-Gold rebounds from biggest weekly loss this year as dollar slips

    * Dollar slides 0.1 pct against a currency basket
    * Focus on Fed chief Powell's congressional appearance
    * GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl

 (Recasts throughout, updates price; adds comment, NEW YORK to
dateline)
    By Renita D. Young and Jan Harvey
    NEW YORK/LONDON, Feb 26 (Reuters) - Gold prices rose on
Monday as a softer U.S. dollar helped the metal rebound from its
biggest weekly loss this year, but moves were muted before the
debut congressional testimony by U.S. Federal Reserve Chair
Jerome Powell later this week. 
    Powell's appearance will be closely watched for clues on the
U.S. monetary policy outlook. The dollar index came off its
highs, lifting gold after it fell last week to its biggest
weekly drop in 2-1/2 months.       
    Spot gold        gained 0.2 percent at $1,331.01 by 1:33
p.m. EST (1833 GMT), while U.S. gold futures        for April
delivery settled up $2.50, or 0.2 percent, at $1,332.80 per
ounce. 
    "What's been most interesting this year is the breakdown of
what gold is tracking most closely, and that has been the U.S.
dollar," Standard Chartered analyst Suki Cooper said, adding
that underlying investment interest has been muted.
    "My main concern with the price run-up that we've seen this
year is that it hasn't been accompanied by broad investment
demand," she said. "To really breach that $1,360-1,375 level, we
need the U.S. retail investor on board as well."    
    Nominally higher-risk assets were buoyant, with European
stocks up as investors bet Powell will flag up an intention to
steer a steady course on U.S. monetary policy when he addresses
lawmakers this week. That view pressured U.S. 10-year Treasury
yields, dragging down the dollar.            
    "Longer-term, the market will start to expect that the Fed
will be behind the curve, so buying gold will be attractive,"
said Daniel Ghali, commodities strategist at TD Securities. 
    But the Fed, looking past a recent stock market sell-off and
inflation concerns, said on Friday it sees steady growth
continuing and no serious risks on the horizon that might pause
its planned pace of rate hikes.             
    Gold is highly sensitive to rising U.S. interest rates,
which increase the opportunity cost of holding non-yielding
bullion and strengthen the dollar, in which it is priced.
    The heads of the European Central Bank and Bank of England
are also set to give speeches this week. 
    Fresh physical demand from China after the end of the
week-long Lunar New Year holiday also supported gold, traders
said.
    "As long as we don't see a massive reversal and gold breaks
below $1,320, that would create a wash-out below $1,300," said
Phillip Streible, senior commodities strategist at RJO Futures.
    Palladium        increased 1.1 percent at $1,058.20 an
ounce, while silver        was up 0.2 percent at $16.57 an ounce
and platinum        gained 0.1 percent at $997.20 an ounce.

 (Additional reporting by Eileen Soreng in Bengaluru; Editing by
Edmund Blair and Rosalba O'Brien)
  
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