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Gold Gains in New York as Unrest Weighed Against U.S. Outlook

July 21 (Bloomberg) -- Gold gained in New York, after the first weekly loss in seven, as investors weighed tension in Ukraine and Gaza against the outlook for higher U.S. interest rates. Palladium traded below a 13-year high.

Gold slipped 2 percent last week as the dollar climbed to a four-week high versus 10 major currencies and Federal Reserve Chair Janet Yellen said benchmark rates could increase sooner than expected. Bullion slid 28 percent last year on expectations the Fed will reduce monetary stimulus.

Unrest in Ukraine and the Middle East partly helped gold rebound 9.4 percent this year. Russian President Vladimir Putin is facing intensified international pressure after pro-Russian rebels were blamed for downing a passenger jet on July 17, killing 298 people on board. A ground offensive in Gaza entered its bloodiest phase yet after two weeks of fighting between Palestinian and Israeli soldiers.

“While economic conditions in the U.S. continue to revive and physical demand from Asia continues to languish, we feel that geopolitical developments are the only possible factor that could support gold in the short term,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report today. “We expect movement in gold to be closely impacted by how geopolitical developments unfold.”

Gold for December delivery rose 0.4 percent to $1,315.70 an ounce by 7:29 a.m. on the Comex in New York. The decline last week ended the longest run of weekly gains since 2011. Bullion for immediate delivery added 0.2 percent to $1,313.70 in London, according to Bloomberg generic pricing.

Trading Volume

Futures trading volume was 38 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg show.

The U.S. and European Union last week tightened sanctions against Russia over its annexation of Crimea and its role in backing rebels in Ukraine. Putin is facing increasing pressure to respond to claims that a Malaysia Airlines jet was downed using a missile supplied from the country.

Silver for September delivery rose 0.5 percent to $20.995 an ounce in New York. Platinum for October delivery added 0.3 percent to $1,494.90 an ounce. Palladium for September delivery increased 0.2 percent to $883.15 an ounce. It reached $890 on July 17, the highest since February 2001.

The metal advanced 23 percent this year as usage in cars rose and a mine strike cut output in South Africa, the second- largest producer. Russia is the largest supplier.

“Against the backdrop of supply disruptions in South Africa, which will continue over the medium-term, as well as the continuous increase in vehicle production in the Chinese and the U.S. automobile industry, it is expected that palladium continues to gain momentum,” Heraeus Metals Germany GmbH & Co. said in a report e-mailed today.

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