Gold prices steady as Trump worries support

By Vijaykumar Vedala

REUTERS - Gold prices held steady on Monday, holding on to the gains from the previous session, as political turmoil surrounding U.S. President Donald Trump helped boost the yellow metal's safe-haven appeal.

Trump was hit on Friday by embarrassing leaks that a senior adviser was a "person of interest" in a probe of possible collusion with Russia during last year's election campaign and that Trump had boasted to Russian officials of firing the man heading the investigation.

Secretary of State Rex Tillerson and National Security Adviser H.R. McMaster defended Trump saying the president had raised the firing of the FBI director James Comey, in a meeting with Russia's foreign minister to explain why he had been unable to find areas of cooperation with Moscow.

"We would advocate abandoning our recent sidelined stance and would buy gold on any significant setback (i.e. a $10-$15/ounce decline from current levels) as markets increasingly coalesced around the notion of continued paralysis in Washington," INTL FCStone analyst Edward Meir said in a note.

Spot gold was nearly unchanged at $1,254.75 per ounce, as of 0755 GMT, after edging down earlier in the session.

U.S. gold futures were up 0.1 percent at $1,254.70 an ounce.

Some of the weekend risk hedging was unwound in early Asia trading, said Jeffrey Halley, senior market analyst at OANDA.

In the wider markets, Asian stocks posted their biggest daily rise in a month on Monday following modest gains in U.S. shares.

The dollar inched higher but held close to six-month lows against a basket of currencies as investors assessed the impact of the political turmoil in the United States.

"The outlook on gold remains relatively hazy at this juncture, given ongoing geopolitical concerns amid a likely rate-hike into the next month," OCBC analyst Barnabas Gan said in a note.

"Fundamentally, we remain bearish on the yellow metal, underpinned by two more rate hikes by the U.S. central bank in 2017."

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

Spot gold is expected to retrace to support at $1,245 per ounce, as it failed to break resistance at $1,257, said Reuters technical analyst Wang Tao.

Hedge funds and other money managers cut their net long position in COMEX gold for the third week in the week ended May 16, taking it to a two-month low, U.S. Commodity Futures Trading Commission (CFTC) data showed.

Meanwhile, silver climbed 0.8 percent to $16.96 an ounce. Early in the day, it touched $17.13 an ounce, its highest since May 1.

Platinum slipped 0.4 percent to $934.49 an ounce, while palladium gained 0.1 percent to $760.25.

(Reporting by Vijaykumar Vedala in Bengaluru; Editing by Joseph Radford and Sherry Jacob-Phillips)