December 20, 2017 / 8:15 AM / 10 months ago

PRECIOUS-Weaker dollar pushes gold up to two-week high

    * U.S. Senate approves tax bill
    * Dollar falls to two-week low
    * U.S. bond yields highest in nine months
    * Gold to slip to $1,200/oz in mid-2018 -Goldman Sachs
    * Palladium hovers around last week's near 17-year high

 (Recasts; updates prices; adds byline, NEW YORK dateline)
    By Marcy Nicholson and Peter Hobson
    NEW YORK/LONDON, Dec 20 (Reuters) - Gold prices rose on
Wednesday for a fourth straight session to reach a two-week high
as U.S. data showing solid home sales but a fall in mortgage
applications pushed the dollar to a two-week low.
    Gains in bullion were limited, however, by a rise in U.S.
bond yields to nine-month highs after the Congress passed the
country's biggest tax overhaul in decades.      
    A weaker dollar makes gold cheaper for holders of other
currencies, which can stimulate demand, but higher Treasury
yields reduce the appeal of non-yielding bullion.
    Spot gold        was up 0.3 percent at $1,265.26 an ounce by
1:53 p.m. EST (1853 GMT), after rising to $1,267.81, the highest
since Dec. 6. 
    U.S. gold futures         settled up 0.4 percent at
$1,269.60. 
    Gold has risen by around 2.5 percent from a five-month low
of $1,235.92 on Dec. 12, helped by a weakening dollar.       
      
    "The price of gold continues to be rangebound between $1,250
and $1,270 as we approach the holiday week," said Walter
Pehowich, executive vice president of investment services at
Dillon Gage Metals. "Many on Wall Street seem to have flattened
out their books and are getting ready for the new year after the
Christmas break."             
    Prices are on track to register their narrowest trading
range in the last quarter of 2017 than any quarter in a decade. 
    "Gold is coming up from a cyclical bottom. It's going to get
quieter due to the upcoming holiday-long weekends," said Mun
Chun Loh, director, Private Wealth at GoldSilver Central Pte Ltd
in Singapore.
    Holdings of the world's largest gold-backed exchange-traded
fund, New York-based SPDR Gold Shares      , fell 1 percent over
Monday and Tuesday to the lowest level since early September.
               
    But low prices have spurred demand for physical gold in
China, with local premiums approaching $11, said MKS PAMP trader
Sam Laughlin.  
    Goldman Sachs said in a research note it expected gold
prices to fall further, reaching $1,200 an ounce by mid-2018. 
    "We see the decline in gold as evidence that 'fear' effects,
which had been keeping gold supported, have at least partially
moderated as U.S. tax reform and the transition to a new (U.S.
Federal Reserve) chair appear to be going smoothly," it said. 
    On the technical side, resistance was at the 200-day moving
average at $1,269.15 an ounce and momentum indicators suggested
gold would extend its recent rise if it remained above a
Fibonacci level of $1,260.50, said analysts at ScotiaMocatta.
    Among other precious metal prices, palladium        gained
0.5 percent to $1,026.97, not far from last week's peak of
$1,038, the highest since February 2001.
    Spot silver        was up 0.3 percent at $16.17 an ounce,
while platinum        was 0.2 percent higher at $915.74 an
ounce, after both rose to 2-1/2-week highs.

 (Additional reporting by Apeksha Nair in Bengaluru; editing by
Elaine Hardcastle and G Crosse)
  
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