July 13, 2017 / 1:20 PM / 2 years ago

Gold edges up after Yellen rate hike view

LONDON (Reuters) - Gold edged higher on Thursday on a weaker dollar and lower U.S. yields, with investors wagering that policy tightening in the United States would be glacial at best, though gains were capped by surging global stock markets.

A employee works on 1 kg. gold bars in Ahlatci Metal Refinery in the central Anatolian city of Corum, Turkey, May 11, 2017. REUTERS/Umit Bektas

The dollar was steady against a currency basket, having fallen to its lowest since last October after U.S. Federal Reserve Chair Janet Yellen struck a less hawkish than expected tone in testimony before Congress on Wednesday.

A weaker U.S. currency makes dollar-priced gold cheaper for non-U.S. investors.

Denting gold’s safe-haven appeal, however, the MSCI world index hit a record high for the fourth time in less than a month as investor took Yellen’s remarks as a green light for risk-taking.

“Risk off is what we need for gold to really come to life. When stock markets do fall, which I think is only a matter of time, then we’ll see gold rise sharply,” said Forex.com analyst Fawad Razaqzada. “Until then it’s still a range-bound market.”

Spot gold rose 0.1 percent to $1,220.49 an ounce by 1156 GMT, having hit its lowest in nearly fourth months at $1,204.45 this week.

U.S. gold futures for August delivery rose 0.1 percent to $1,219.80.

The U.S. economy is healthy enough for the Fed to raise interest rates, though low inflation and a low neutral rate could leave the central bank with diminished leeway, Yellen said on Wednesday.

The comments, part of her two-day monetary policy testimony, prompted a rally in treasuries, with yields on two-year notes falling to three-week lows. Lower yields reduce the opportunity cost of holding non-yielding bullion.

“The consolidation around $1,220 should be viewed as positive for near-term pricing, with the relatively light long positioning instilling confidence in the market that the metal is open to further top-side moves,” MKS said in a note.

“Geopolitical concerns out of the Korean peninsula are likely to supportive for the broader precious complex, while the very fluid Trump-Russia collusion story continues to create uncertainty across markets.”

Among other precious metals, silver rose 0.1 percent to $15.89 an ounce.

“Interestingly, the gold/silver ratio is approaching 80, meaning that silver is very inexpensive compared with gold and is a particularly good bargain,” said Gregor Gregersen at Singapore-based Silver Bullion Pte.

Palladium < rose 0.4 percent to $867 while platinum was flat at $916.60, adding to the previous session’s 1.7 percent gain, its biggest since June 2.

Additional reporting by Nithin Prasad and Arpan Varghese; Editing by David Goodman

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