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Gold inches up as dollar slides, even as risk premium fades

By Chris Prentice and Jan Harvey
A woman shops for jewellery at a shop in the Gold Souq in Dubai, United Arab Emirates March 24, 2018. Picture taken March 24, 2018. REUTERS/Christopher Pike

By Chris Prentice and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold prices rose on Monday as losses in the U.S. dollar bolstered, though gains were muted as financial markets bet that air strikes on Syria would not escalate into a wider conflict.

Prices have trended sideways since January, buoyed by geopolitical worries but capped by expectations for further U.S. interest rate hikes and strong technical resistance at $1,360-$1,365 an ounce - their January, February and April highs.

Spot gold <XAU=> was up 0.10 percent at $1,346.31 per ounce by 2:49 p.m. EST, up 0.1 percent, as U.S. gold futures <GCcv1> for June delivery settled up 0.21 percent at $1,350.70 per ounce.

Forces from the United States, Britain and France targeted Syria with air strikes on Saturday, hitting what they said were three of its main chemical weapons facilities.

Gold prices reached a high of $1,350.52 on the back of the news, but struggled to maintain those gains amid expectations the attacks would not mark the start of greater Western involvement in the conflict.

"Some of the risk (premium) has come down following the air strikes," Capital Economics analyst Simona Gambarini said. "Some market participants were thinking that maybe there could be an escalation of the tensions, but that has not happened and therefore prices have come down a bit."

Bullion found support as the dollar sank against the euro.

"Syria, China trade tensions, and the dollar index falling off are all good reasons for gold prices to continue to rise," said senior market strategist at RJO Futures in Chicago. "It's disappointing there wasn't more of a rally, but traders are turning to equities at these levels."

Speculators raised their net long positions in COMEX gold contracts by 363 contracts to 138,212 contracts in the week to April 10, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday. [CFTC/]

Silver <XAG=> was up 0.39 percent at $16.683 per ounce.

Palladium <XPD=> rose 1.54 percent at $1,002.22 an ounce, off highs of $1,012.10, the strongest since March 1. Platinum <XPT=> was 0.15 percent higher at $928.90.

"Palladium is shooting up because of Russian sanctions," said George Gero, managing director of RBC Wealth Management.

Prices rose 9.6 percent last week, their biggest weekly gain in more than a year, as concerns that supply from number one producer Russia could be disrupted by U.S. sanctions fed into a strong technical rebound following the metal's 20 percent fall from its January record high.

The gyrations shot palladium's premium above platinum above $76 an ounce, the strongest since January.

Platinum has historically been the higher-priced metal, but supply concerns have driven palladium to a rare premium in recent months.

(Reporting by Jan Harvey; Additional reporting by Swati Verma in Bengaluru; editing by Alexander Smith and Chizu Nomiyama)