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PRECIOUS-Gold turns positive after touching 2-1/2 week low
October 25, 2017 / 10:38 AM / in a month

PRECIOUS-Gold turns positive after touching 2-1/2 week low

    * North Korea diplomat said take foreign minister's nuclear
warnings literally
    * Fed leadership contender Taylor seen as hawk
    * U.S. 10-year yields at 7-month high
    * Gold hovering around 100-day moving average

 (Recasts, updates prices, headline; adds comment, NEW YORK
dateline)
    By Renita D. Young and Peter Hobson
    NEW YORK/LONDON, Oct 25 (Reuters) - Gold steadied after
touching a 2-1/2 week low on Wednesday on reports that
Republican senators favored John Taylor to become the next head
of the U.S. Federal Reserve, which drove U.S. bond yields to
multi-month highs. 
    The Stanford University economist is seen as someone who
would raise interest rates at a quicker pace.              Gold
is sensitive to rising U.S. interest rates because they push up
bond yields and tend to strengthen the dollar. 
    "If he (U.S. President Donald Trump) does indeed choose
Taylor, gold is likely to fall sharply," Commerzbank analysts
said in a note. 
    The market was pricing in one rate increase in December and
one more next year, while the Fed itself envisaged three rate
hikes in 2018 and was likely to move more rapidly than
previously expected under Taylor.
    While that kept prices of the precious metal under pressure,
geopolitical risk pulled bullion prices back from earlier
losses. A senior diplomat in North Korea said the foreign
minister's warning of a possible atmospheric nuclear test over
the Pacific Ocean should be taken literally.             
    North Korean Minister of Foreign Affairs Ri Yong Ho said in
September that Pyongyang may consider conducting "the most
powerful detonation" of a hydrogen bomb over the Pacific Ocean
amid rising tensions with the United States.
    "I don't think the North Korea news makes gold prices
sustainably higher, unless these headlines come to some actual
conflicts," said Ryan McKay, commodity strategist at TD
Securities in Toronto.
    Spot gold        was up 0.02 percent at $1,276.61 an ounce
by 2:17 p.m. EDT (1817 GMT), after hitting $1,271.11, the lowest
since Oct. 6. 
    U.S. gold futures         for December delivery settled up
70 cents, or 0.05 percent, at $1,279 per ounce. 
    Bullion prices        were hovering just above its 100-day
moving average at $1,275.
    Upbeat U.S. durable goods and home sales data also bolstered
the case for interest rate hikes, helping push U.S. 10-year
Treasury yields to the highest since March and yields on 30-year
bills to the highest since May.                    {US/]
                         
    The dollar, however, weakened as the euro rose ahead of a
European Central Bank meeting on Thursday and sterling gained on
stronger-than-expected UK growth data.
    A weaker dollar makes dollar-denominated gold cheaper for
holders of other currencies, but higher bond yields reduce the
appeal of non-yielding bullion, dampening demand.  
    In other precious metals, silver        was down 0.06
percent at $16.93 an ounce.
    Platinum        was down 0.22 percent at $917.99 an ounce
and palladium        was down 0.3 percent at $959.22 an ounce.  

 (Additional reporting by Apeksha Nair in Bengaluru, editing by
Susan Fenton and Chizu Nomiyama)
  

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