June 21, 2018 / 2:13 PM / a month ago

PRECIOUS-Gold up slightly as dollar drops; Russia buys bullion

    * Holdings of U.S.-based gold ETFs down
    * Russia seen buying bullion -traders
    * Palladium down 1.5 percent

 (New throughout, updates prices, market activity and comments;
adds second byline and NEW YORK dateline)
    By Renita D. Young and Pratima Desai
    NEW YORK/LONDON, June 21 (Reuters) - The price of gold rose
slightly on Thursday, lifted off an early six-month low as the
U.S. dollar fell from an 11-month high, with traders saying they
heard Russia had bid for bullion.
    Spot gold        was up 0.2 percent at $1,265.4 an ounce at
1501 GMT but off a low of $1,260.84, its weakest level since
Dec. 19. U.S. gold futures         for August delivery settled
down $4, or 0.3 percent, at $1,270.50 per ounce. 
    "Gold started to pick up as the dollar weakened," said RJO
Futures' Dan Pavilonis.
    The dollar fell off an 11-month high against a basket of
major currencies as the Philadelphia Federal Reserve's gauge of
U.S. Mid-Atlantic business activity fell to a near 1-1/2 year
low, spurring profit-taking on the greenback.             
    Higher U.S. interest rates and the prospect of further rate
hikes this year from the Federal Reserve have boosted the dollar
to its highest since last July against a basket of major
currencies       .       
    Higher interest rates would encourage investors to sell
gold, which earns nothing and costs money to store and insure.
    A rising U.S. currency also sends a sell gold signal to
funds that use numerical models because a strong dollar makes
commodities more expensive for holders of other currencies. 
    Even so, traders said they have seen gold purchases come
from Russia.
    "We’ve been hearing in the news over the last couple weeks
that Russia has been buying more gold and selling U.S.
Treasuries," Pavilonis added.
    Russia could be attempting to shore up its currency because
of falling crude oil prices, said George Gero, vice president of
RBC Capital Markets. 
    "And also, they are a large producer of gold and they may be
trying to stabilize the market," Gero added.
    Meanwhile, holdings of U.S.-based gold-backed exchange
traded funds have fallen since April.                
            
    "Uncertainty would normally fuel demand for gold as a safe
haven, which we would see in the physically backed products, but
instead we are seeing outflows from the U.S. products," said
Julius Baer analyst Carsten Menke.
    "From the perspective of a U.S. investor, focused on the
domestic market and economy, the threat from trade tensions is
much lower than in Europe. U.S. domestic consumption is a major
driver of growth and there isn't a problem there."
    Silver gained 0.4 percent at $16.33 an ounce, earlier
falling to $16.16, its lowest since May 2. 
    Palladium        lost 1.5 percent at $950, earlier sinking
to $948.50, a seven-week low. Platinum        slipped 0.1
percent at $866.10 per ounce .

 (Editing by David Gregorio and David Evans)
  
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