July 13, 2018 / 2:15 PM / 3 months ago

PRECIOUS-Gold slides to seven-month lows as dollar climbs

    * Investors retreat from physical gold holdings
    * Opportunity cost for gold set to rise further

 (Updates prices)
    By Pratima Desai
    LONDON, July 13 (Reuters) - Gold prices slid to seven-month
lows on Friday as the dollar rose due to easing trade tensions
and weak demand for the precious metal on expectations of higher
U.S. interest rates.
    Spot gold        was 0.5 percent lower at $1,240.11 an ounce
at 1358 GMT from an earlier $1,236.58, its lowest since Dec. 12.
U.S. gold futures         slipped 0.5 percent to $1,240.9 an
ounce.
    Gold prices are down about 9 percent since mid-April.
    Tensions between the United States and China eased after
U.S. Treasury Secretary Steven Mnuchin said on Thursday talks
between the world's two largest economies could be reopened if
Beijing was willing to make significant changes.
    A rising U.S. currency makes dollar-denominated gold more
expensive for holders of other currencies, which potentially
weighs on demand.       
    "When the dollar rises we see gold falling, but when the
dollar falls we don't see gold recovering because there is very
little appetite for gold at this time," said ActivTrades analyst
Carlo Alberto De Casa. "Higher interest rates in the U.S. means
holding gold costs money."
    Gold does not earn any interest or dividends and costs money
to store and insure.
    The Federal Reserve last month raised its benchmark
overnight lending rate 25 basis points to 1.75-2.0 percent.
Expectations are for another two rate rises this year and three
in 2019.        
    Investors retreating from gold can be seen in the largest
gold-backed exchange-traded-fund (ETF), New York's SPDR Gold
Trust GLD, which has seen its holdings fall more than 8 percent
since late April to below 26 million ounces.                
    On the technical front, any attempts on the upside will meet
resistance at the 21-day moving average, currently around
$1,258, while support is at $1,237.32, the low on July 3
followed by the December trough at $1,352.92.
    Silver        fell 0.9 percent to $15.75 an ounce, platinum
       lost 1.6 percent to $825.80 an ounce and palladium       
was 1.0 percent lower at $940.10.
    "The global trade dispute is threatening to disrupt auto
sales, placing a question mark over platinum and palladium
demand," ANZ analysts said in a note.
    "While auto sales numbers suggest steady demand growth for
palladium, expect a moderate decline in auto catalyst demand for
platinum this year."
    More platinum than palladium is used in diesel engines,
whose sales have fallen since Volkswagen             was found
in 2015 to have cheated in emissions tests.             

 (Additional reporting by Apeksha Nair in Bengaluru
Editing by Jon Boyle and Edmund Blair)
  
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