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PRECIOUS-Gold rises to 1-week high on subdued dollar, Fed rate cut hopes

Kitco News

* SPDR Gold holdings rise 0.5% on Wednesday

* Palladium hits more than six-week high (Adds comments, details, updates prices)

By Eileen Soreng

June 13 (Reuters) - Gold prices rose to a week high on Thursday, supported by expectations of an interest rate cut by the U.S. Federal Reserve following soft inflation data, which also weighed on the dollar.

Spot gold was up 0.3% at $1,336.82 per ounce at 0950 GMT. Prices touched $1,338.87 earlier in the session, a high since June 7.

U.S. gold futures were 0.2% higher at $1,340 an ounce.

“We had disappointing U.S. inflation data which reinforced market expectations that the Fed would cut interest rates which itself is a positive for gold and related to that we see some weakness on U.S. dollar today,” Julius Baer analyst Carsten Menke said.

Data from the Labor Department showed on Wednesday U.S. consumer prices barely rose in May, pointing to moderate inflation that together with a slowing economy increased pressure on the U.S. central bank to cut interest rates this year.

Fed policymakers are scheduled to meet on June 18-19 against the backdrop of rising trade tensions, slowing growth and a sharp step-down in hiring in May which have led financial markets to price in at least two rate cuts by the end of 2019.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

The dollar index versus a basket of six major currencies was down 0.1% on Thursday.

On the trade front, U.S. President Donald Trump declined to set a deadline on Wednesday for levying tariffs on another $325 billion of Chinese goods and called the relationship with Beijing good but “testy” after China walked back commitments for a trade deal.

“Since the beginning of June we’ve had quite constant inflows into physically backed gold products as investors are weighing risks related to the trade tensions between the U.S. and China and also between U.S. and Mexico,” Julius Baer’s Menke added.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.5% to 759.70 tonnes on Wednesday from 756.18 tonnes on Tuesday.

On the technical side, the next topside resistance for gold sits between $1,346-$1,349 and if this breaks a quick rise to $1,360-$1,366 would be on the cards, MKS PAMP Group said in a note.

“On the downside, we believe there will be macro and physical support between $1,305-$1,320, which we view as a good buying opportunity,” it said.

Elsewhere, silver climbed 0.7% to $14.83 per ounce and platinum was up 0.1% to $807.75.

Palladium gained 1.3% to $1,424.60 an ounce after hitting a more than six-week high of $1,432.79 earlier in the session. (Reporting by Eileen Soreng and Brijesh Patel in Bengaluru, editing by Deepa Babington)

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