January 9, 2020 / 4:17 PM / 12 days ago

PRECIOUS-Gold's rally fizzles on de-escalating U.S.-Iran tensions

 (Updates prices)
    * Palladium hits record peak of $2,149.50/oz
    * SPDR Gold holdings fell 1.05% on Wednesday

    By Eileen Soreng
    Jan 9 (Reuters) - Gold fell on Thursday, having surged past
the key $1,600 level for the first time in seven years in the
last session, as markets wagered the United States and Iran will
not resort to a further conflict, boosting risk-taking. 
    Spot gold        fell 0.2% to $1,552.28 per ounce at 1:51
p.m. ET (1851 GMT), having earlier slipped to $1,539.78 an
ounce. U.S. gold futures        settled down 0.4% at $1,554.3
per ounce.
    "The return of risk appetite meant that safe assets such as
gold have suffered from some profit-taking and it's possible
that could continue for a little longer," Standard Chartered
Bank analyst Suki Cooper said.
    Gold prices slid after having risen as much as 2.4% early on
Wednesday to break above the key $1,600 level after Iran's
retaliatory attacks on military bases housing U.S. troops in
Iraq.
    Concerns of a wider war in the Middle East subsided after
U.S. President Donald Trump refrained from ordering more
military action on Wednesday and Iran's foreign minister
diplomat said missile strikes "concluded" Tehran's response.
            
    Reduced demand for safe-haven bullion was also reflected in
the holdings of the world's largest gold-backed exchange-traded
fund SPDR Gold Trust      , which dropped 1.05% on Wednesday.
         
    "Gold will remain very twitchy on Iran-related headlines or
rocket fire in Baghdad for some days to weeks," said Tai Wong,
head of base and precious metals derivatives trading at BMO.
    "Even if the de-escalation happens there should still be
some risk premium helping gold hold above $1,525 level where
gold was trading before the U.S. strike."
    As the United States and Iran backed away from conflict in
the Middle East, U.S. stock indexes hit record highs, while
firming optimism about a U.S.-China trade deal added to the
upbeat mood.      
     China's Vice Premier Liu He will sign a Phase 1 deal in
Washington next week, the commerce ministry said on Thursday. 
            
    Elsewhere, palladium        hit a record peak of $2,149.50
an ounce on sustained supply concerns, and was last down 0.4% at
$2,096.06 per ounce.
    "The outlook for palladium remains bullish. There is simply
not enough material around and being taken out of the ground,"
said BMO's Wong said.
    "The demand is really inelastic because substitution (with
platinum) is difficult and if you are an automaker you need the
catalytic converters to sell cars, so you will pay what you
need."
    Silver        fell 1% to $17.90 per ounce, while platinum
       gained 1.2% to $964.82.

 (Reporting by Eileen Soreng in Bengaluru; Editing by Lisa
Shumaker and Steve Orlofsky)
  
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