September 25, 2017 / 2:26 PM / 10 months ago

PRECIOUS-Gold rises as geopolitical risks drive safe-haven buying

    * Euro weakens as Germany's Merkel faces coalition talks
    * Physical gold demand soft across Asia -dealers
    * GRAPHIC-2017 asset returns:

 (Updates prices; adds comment, second byline, NEW YORK
    By Renita D. Young and Jan Harvey
    NEW YORK/LONDON, Sept 25 (Reuters) - Gold prices rose on
Monday, reversing earlier losses as geopolitical risks drove
safe-haven buying.
    Bullion rose 1 percent on rising tensions between North
Korea and the United States, and on German Chancellor Angela
Merkel's less-than-resounding victory in Sunday's national
    North Korean Foreign Minister Ri Yong Ho said U.S. President
Donald Trump had declared war on the Asian nation and Pyongyang
reserves the right to take countermeasures, including shooting
down U.S. bombers.             
    Merkel must find partners to build a coalition government
after securing a fourth term as German chancellor.             
    Escalating U.S.-North Korea tensions will "create a shift in
assets. People are going to come out of shiftier assets like the
S&P 500 and go into safe havens like gold, silver and the U.S.
treasuries," said Phillip Streible, senior commodities broker at
RJO Futures in Chicago.
    Spot gold        was up 0.85 percent at $1,308.06 an ounce
by 2:48 p.m. EDT (1848 GMT). It fell earlier as the German
election results hit the euro. 
    U.S. gold futures        for December delivery settled up
$14, or 1.08 percent, at $1,311.50 per ounce. 
    Gold has now slipped 3.5 percent from the more than one-year
high it hit on Sept. 8, largely on the back of concerns over
North Korea's nuclear ambitions. 
    The euro        slipped against the dollar and southern
European government bonds sold off after the German election
results sparked fears of a more hardline stance towards the euro
zone in the bloc's largest economy.                 
    Gold has recently come under pressure from rising
expectations the Federal Reserve will lift U.S. interest rates
once more this year and start trimming its $4.5 trillion balance
sheet, much of it built up after the 2008 financial crisis.
    Tighter monetary policy raises the opportunity cost of
holding non-yielding bullion.  
    The Chicago Federal Reserve Bank's president said on Monday
he is a little "nervous" the causes of low inflation might be
structural rather than temporary.             
    Physical gold demand remained soft in major Asian markets
last week despite lower prices, with consumers awaiting further
dips, while a government move to bring transparency to bullion
trading kept buyers on the sidelines in India.         
    Silver        rose 0.93 percent to $17.108 an ounce after
falling more than 3.5 percent last week in the biggest weekly
decline since early July.
    Platinum        was up 0.90 percent to $938.90 an ounce
after touching the lowest price since late July. Palladium
       was down 0.61 percent at $910.90 an ounce.

 (Additional reporting by Nithin Prasad in Bengaluru; Editing by
David Goodman and Paul Simao)
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