Gold hits five-month high as Trump comments hurt dollar

By Jan Harvey

LONDON (Reuters) - Gold rallied to a five-month high on Thursday, on track for its best week since June, after the previous day's comments by U.S. President Donald Trump on the the strength of the dollar knocked the currency lower.

The dollar came under heavy pressure along with Treasury yields after Trump said that strength in the U.S. currency would eventually hurt the economy.

With concerns over North Korea and the Middle East already supporting gold, the currency nudged up to its strongest since early November at $1,288.64 an ounce before steadying in later trade.

Spot gold was up 0.1 percent at $1,286.87 an ounce by 1150 GMT, while U.S. gold futures for June delivery gained $10.90 to $1,289.00.

"Gold's recapture of $1,280 for the first time since November is significant, as it opens up a trading range potentially to $1,300," Mitsubishi analyst Jonathan Butler said.

"However, gold is now moving into overbought territory on a short-term relative strength index basis, and there is elevated risk of profit-taking from here. Nonetheless, risk aversion should continue to support gold in the medium term."

Trading volumes in wider markets have been light ahead of Easter, with most financial markets closed from the Good Friday holiday.

Trump's comments put the U.S. dollar and Treasury yields on track for their biggest weekly declines this year, while stock markets fell half a percent in Europe.

Fears of a new weapons test by North Korea as a U.S. carrier group sailed towards the region, as well as worries about the forthcoming French presidential election, also kept investors on edge.

Russian President Vladimir Putin said on Wednesday that trust had eroded between the United States and Russia under Trump, as Moscow delivered an unusually hostile reception to U.S. Secretary of State Rex Tillerson in a face-off over Syria.

"We remain constructive on gold (given) elevated political tensions in both Korea and Syria, coupled with a lower drift evident in U.S. equity markets," INTL FCStone said in a note.

Among the major physical gold markets, the precious metal was sold at a discount to spot prices in India this week for the first time in six weeks, while demand elsewhere in Asia remained subdued as surging bullion prices deterred buyers.

Among other precious metals, silver was up 0.5 percent at $18.55, off an earlier five-month high of $18.599. Platinum was 0.6 percent higher at $974, while palladium rose 1.5 percent to $808.90.

(Reporting by Nallur Sethuraman in BENGALURU; Editing by David Goodman)