By Pratima Desai
LONDON (Reuters) - Gold prices rose on Friday as the dollar came under pressure ahead of a speech by the U.S. Federal Reserve chairman, which could yield clues to the direction of U.S. monetary policy.
Growing U.S. political uncertainty, reinforced by the legal woes of two of U.S. President Donald Trump's former advisers this week, is keeping the dollar under pressure despite tighter U.S. monetary policy, analysts say.
"The dollar is behind the rebound in gold, but it is still locked between $1,180 and $1,200, waiting for clear direction," said ActivTrades' chief analyst Carlo Alberto De Casa.
A weaker U.S. currency makes dollar-denominated gold cheaper for holders of other currencies, which could boost demand and prices.
"Investors are still looking for alternative safe assets to gold and the main downtrend appears unchanged," De Casa added.
Investors have in recent months sought safety from the U.S.-China trade dispute in U.S. Treasury bonds, which also entails buying dollars.
Fed Chairman Jerome Powell is to speak at an annual meeting of central bankers in Jackson Hole, Wyoming, later on Friday.
A Reuters survey published on Thursday showed analysts expecting U.S. rates to rise twice more this year and twice next year. The Fed next meets over Sept. 25-26.
Higher rates raise the opportunity cost of holding gold, which earns nothing and costs to store and insure.
"Investor appetite for gold has been in the doldrums in recent months. Rate hikes, low inflation, rising equity markets and a strong dollar have significantly diminished the appeal of gold," ANZ analysts said in a note.
"The fall in gold prices could invigorate a pick-up in physical demand. Overall we see gold prices stabilising at current levels, with the probability of a short-covering rally increasing substantially."
Data on COMEX gold short positions held by speculators will be updated on Friday by the U.S. Commodity Futures Trading Commission (CFTC).
Last week's data showed hedge funds and money managers raising their net short position for the sixth straight week to another record in the week to Aug. 14.
Investors shunning gold can also be seen in the holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust
(Reporting by Pratima Desai; Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Mark Heinrich)
This story has not been edited by Firstpost staff and is generated by auto-feed.
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Updated Date: Aug 25, 2018 00:08:34 IST