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Gold edges lower on political drama and firming dollar

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Gold prices edged lower on Wednesday, pressured by a recovering dollar and an expectation of higher interest rates, but supported by safe-haven buying after the sudden dismissal of US Secretary of State Rex Tillerson.

[NEW YORK] Gold prices edged lower on Wednesday, pressured by a recovering dollar and an expectation of higher interest rates, but supported by safe-haven buying after the sudden dismissal of US Secretary of State Rex Tillerson.

Spot gold declined 0.1 per cent at US$1,324.40 per ounce by 1.36pm EST (1736 GMT), earlier touching US$1,330.02, its highest since March 7.

US gold futures for April delivery settled down US$1.50, 0.1 per cent, at US$1,325.60 per ounce.

"The political uncertainty has limited the downside price risk for gold in a raising rates environment, as opposed to driving prices significantly higher," said Suki Cooper, Standard Chartered Bank precious metals analyst.

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Rising interest rates tend to make gold less attractive since it does not bear interest.

Technical Fibonacci support for gold was at US$1,317.20 an ounce with resistance at US$1,336.30, said analysts at ScotiaMocatta in a note.

Gold is seen as a safe haven during times of political and financial uncertainty and benefited on Tuesday when President Donald Trump fired Mr Tillerson after a series of public rifts over policy, replacing him with loyalist CIA Director Mike Pompeo.

Investors have switched to become more risk-averse following the unexpected news of Mr Tillerson's dismissal and the appointment of Mr Pompeo, said OCBC analyst Barnabas Gan.

The US dollar inched higher against major currencies, recovering from a decline caused by the dismissal of Tillerson.

A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies.

"Pompeo is a supporter of Trump's trade policy and could help advance his agenda of imposing it on US trading partners ... all this uncertainty and risk aversion leaves gold as a safe haven option," Mr Gan added.

Supporting gold was news that Trump was seeking to impose tariffs on up to US$60 billion of Chinese imports and will target the technology and telecommunications sectors.

Meanwhile, data on Tuesday showed US consumer prices cooled in February amid a decline in petrol prices and a moderation in the cost of rental accommodation, the latest indication that an anticipated pick-up in inflation probably will be gradual.

Inflation is a key economic factor the US central bank considers when deciding monetary policy. A strong US inflation reading could raise expectations for future interest rate increases, pressuring on non-yielding bullion.

In other precious metals, silver was barely changed at US$16.53 per ounce.

Platinum was flat at US$960.60 an ounce after touching US$973.20, a one-week high, and palladium dropped 0.2 per cent to US$988.70, reaching a near two-week high earlier at US$1006.30.

REUTERS

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