July 13, 2018 / 2:16 PM / 2 months ago

PRECIOUS-Gold, silver slide to seven-month lows as dollar climbs

    * Investors retreat from physical gold holdings
    * Opportunity cost for gold set to rise further

 (Updates prices, headline; adds comment, second byline, NEW
YORK to dateline)
    By Renita D. Young and Pratima Desai
    NEW YORK/LONDON, July 13 (Reuters) - Gold and silver prices
slid to seven-month lows on Friday as the dollar rose to a
two-week peak, buoyed by safe-haven purchases made in an ongoing
U.S.-China tariff trade war. Demand for the precious metals also
waned on expectations of higher U.S. interest rates.
    Spot gold        lost 0.5 percent at $1,240.90 per ounce by
1:34 p.m. EDT (1734 GMT), after earlier falling to $1,236.58,
its lowest since Dec. 12. U.S. gold futures         settled down
$5.40, or 0.4 percent, at $1,241.20 per ounce. 
    Gold prices are down about 9 percent since mid-April.
Bullion is heading for a 1 percent weekly decline.
    Silver        fell 0.6 percent at $15.80 an ounce, earlier
hitting $15.67 per ounce, its lowest since Dec. 13. The white
metal is heading for a 1.2 percent weekly drop.
   The U.S. dollar was little changed after peaking at a
two-week high on Friday against a basket of currencies after
data showing a record Chinese trade surplus, which may add fuel
to U.S.-China trade tensions, spurred more investors to pile
into the safety of the greenback.             
    A rising U.S. currency makes dollar-denominated gold more
expensive for holders of other currencies, which potentially
weighs on demand.       
    "We (also) have increased expectations of Fed rate
increases," said Rob Haworth, senior investment strategist for
U.S. Bank Wealth Management. 
    The Fed's semi-annual report to Congress on Friday pointed
to "solid" U.S. economic growth during the first half of the
year, and reiterated that the U.S. central bank expected to
continue to raise interest rates gradually.             
    Higher interest rates make gold more expensive to own since
bullion does not earn any interest or dividends, and costs money
to store and insure.
    Speculators recently cut their net long position in COMEX
gold to the weakest position since January 2016.             
    "Bullish speculation is now at a new low. We are reaching a
point where we may be pausing here," Haworth added.
    Holdings for the largest gold-backed exchange-traded-fund,
New York's SPDR Gold Trust, have fallen more than 8 percent
since late April to below 26 million ounces.                
    Platinum        lost 1.9 percent at $823.50 an ounce, and
palladium        dropped 1.6 percent at $934.80. Both were
headed for a nearly 2 percent weekly decline. 
    "The global trade dispute is threatening to disrupt auto
sales, placing a question mark over platinum and palladium
demand," ANZ analysts said in a note.
    "While auto sales numbers suggest steady demand growth for
palladium, expect a moderate decline in auto catalyst demand for
platinum this year."
    More platinum than palladium is used in diesel engines,
whose sales have fallen since Volkswagen             was found
in 2015 to have cheated in emissions tests.                 

 (Additional reporting by Apeksha Nair in Bengaluru
Editing by Edmund Blair and Phil Berlowitz)
  
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