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PRECIOUS-Gold rises but U.S. rate expectations cap gains
October 10, 2017 / 10:34 AM / 7 days ago

PRECIOUS-Gold rises but U.S. rate expectations cap gains

    * Silver at three-week high above $17/oz
    * Platinum touches highest in two weeks
    * Dollar index falls for third day running

 (Updates prices; adds comment, byline, NEW YORK dateline)
    By Marcy Nicholson and Maytaal Angel
    NEW YORK/LONDON, Oct 10 (Reuters) - Gold touched its highest
in nearly two weeks on Tuesday, supported by a softer dollar and
geopolitical tensions in Spain and North Korea, though gains
were capped by expectations of another U.S. interest rate
increase.
    Investors were particularly wary on Tuesday as Pyongyang
celebrated the founding of its ruling party, a day after Russia
and China both called for restraint on North Korea following a
Twitter post from U.S. President Donald Trump hinting that
military action was on his mind.                          
    In Spain, the leader of Catalonia's government called for a
reduction in tensions in its standoff with Madrid over a bid in
the wealthy northeastern region for independence.
                        
    The dollar index        fell, Wall Street stock indexes
scaled new records and U.S. Treasury yields dropped.            
    "The Fed is going to raise rates, so we see gold breaking
out of the (current) range down to the $1,250 level, with
geopolitical tensions supporting the downside," said Societe
Generale analyst Robin Bhar.
    Spot gold        was up 0.5 percent at $1,289.81 an ounce by
1:53 p.m. EDT (1753 GMT), having touched its highest since late
September at $1,294.25.
    U.S. gold futures         for December delivery settled up
0.7 percent at $1,293.80. 
    "The only news holding down the price of course are the
impending rate hikes from the Federal Reserve but if these
political issues grow much worse you can bet that $1,300 will
not be the top," said Miguel Perez-Santalla, vice president of
Heraeus Metal Management in New York, referring to concerns
about Spain and North Korea.
    Fed funds futures showed traders were pricing in a nearly 90
percent chance of a December rate increase.
    Gold is highly sensitive to rising interest rates, which
increase the opportunity cost of holding non-yielding bullion.
Higher rates also tend to boost the U.S. currency, making
dollar-priced gold costlier for non-U.S. investors.
    In other precious metals, silver        rose 1.3 percent to
$17.16 an ounce, after rising to the highest since Sept. 20 at
$17.248.
    "The gold-silver ratio is trading above the 10-year average,
suggesting silver is undervalued," Standard Chartered said in a
note.
    "Silver's supply and demand dynamics are supportive of
higher prices in light of stagnating mine output and firming
industrial demand. India's silver imports are up almost 60
percent for the year to August while China's are up 45 percent."
    Platinum        was up 2.3 percent at $932.60 an ounce,
having hit its highest in two weeks at $933.90, while palladium
       rose 0.3 percent to $932.60.

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
David Evans and James Dalgleish)
  

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