January 3, 2018 / 11:02 AM / 9 months ago

PRECIOUS-Gold slips from 3-1/2 month peak as dollar edges higher

    * Investors await Fed minutes due on Wednesday
    * Technicals show gold rally is overstretched -analyst
    * Palladium off record highs hit on Tuesday

 (Updates prices)
    By Jan Harvey
    LONDON, Jan 3 (Reuters) - Gold eased from an earlier 3-1/2
month high on Wednesday and was on track for its first day of
losses in nearly three weeks as a firmer dollar pressured assets
priced in the U.S. currency. 
    The dollar's late December retreat had driven gold sharply
higher, leading to fears that the metal was becoming overbought.
    Spot gold        was down 0.1 percent at $1,316.56 an ounce
at 1230 GMT on Wednesday, off an earlier peak of $1,321.33.
    "It's still the dollar that is still very much in the
driving seat for gold," said Julius Baer analyst Carsten Menke.
"We're bearish on the euro versus the U.S. dollar, so if that
materialises, and this close relationship holds between gold and
the dollar, it should move towards $1,225 or so."
    The dollar rose 0.3 percent against the euro in early trade,
though it remained near a four-month low after declining nearly
3 percent in the past three weeks.       
    Investors are awaiting manufacturing data and minutes of a
December U.S. Federal Reserve meeting due later in the day,
which will be closely watched for clues on the outlook for U.S.
monetary policy. 
    Gold, which as a non-yielding asset is highly sensitive to
rising interest rates, fell in the run-up to the third U.S.
interest rate rise of 2017 in December but quickly recovered,
climbing 5 percent from its mid-month low to the year's close.
    Spot gold's 14-day relative strength index (RSI) touched 75
on Tuesday, it highest since September 2017. An RSI above 70
indicates a commodity is overbought and could herald a price
correction, technical analysts say.
    "Relative strength index shows the metal at overbought
levels, which may lead to short-term selling," ScotiaMocatta
analysts said in a research note.
    U.S. gold futures        for February delivery were up $1.40
an ounce at $1,317.50.
    Among other precious metals, palladium        was down 1
percent at $1,080.99 after hitting a record high on Tuesday at
$1,096.50. 
    The metal soared 56 percent in 2017 on fears that strong
demand from carmakers for use in catalytic converters, chiefly
in gasoline-powered vehicles, would tighten the market further
after years of deficit.
    "Palladium has more than doubled as compared with its
multi-year low in mid-January 2016," Commerzbank said in a note.
"This precious metal is presumably being driven further up by
concerns of ongoing shortages ... the diesel scandal is still
playing its part in this, as it has generated high demand for
cars with gasoline engines."
    Spot silver        was down 0.4 percent at $17.11 an ounce
after touching a six-week high of $17.21 while platinum       
dipped by 0.1 percent to $942.40. 

 (Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by Adrian Croft and David Goodman)
  
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