Gold lacklustre, investors wary ahead of French vote

By Eric Onstad

LONDON (Reuters) - Gold prices were steady on Friday with investors awaiting the first-round of voting in the French election at the weekend and possible announcements about tax changes in the United States.

Spot gold was down 0.1 percent at $1,280.51 per ounce at 1430 GMT, on track for its first weekly drop in six.

U.S. gold futures also fell 0.1 percent to $1,282.50.

"The big news over the weekend will be the French election and the market will be to an extent on hold ahead of that," said Mitsubishi commodities analyst Jonathan Butler.

There was potential for safe-haven buying of gold after France said security forces were fully mobilised for the weekend vote after an Islamist militant killed a policeman.

"Into the near term, if the geopolitical tensions intensify, there is a chance that gold prices will reach $1,300 or more," OCBC analyst Barnabas Gan said.

Moving above $1,290/91 would be significant as it would break above a downtrend that has been in place since gold touched an all-time high of $1,920.30 in 2011, Butler said.

Investors were also watching the United States. "Over next week or so, I think we'll start to see whether the reflation trade is back on, which might be backed up by some announcements from the U.S. administration on tax reform," Gan said.

U.S. President Donald Trump's administration will unveil a tax reform plan soon and expects it will be approved by Congress this year whether a healthcare overhaul happens or not, Treasury Secretary Steven Mnuchin said on Thursday.

Gold is at risk of some profit taking after a strong recent run, but should be supported by other factors, analysts said.

"Gold struggled to hold this week's gains as the dollar strengthened and concerns over global risk eased. However, selling was relatively muted, which suggests a period of consolidation is now upon us," ANZ analysts wrote in a note.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.76 percent to 854.25 tonnes on Thursday. The outflows follow a 11.8-tonne rise on Wednesday, the biggest one-day inflow since September.

Spot silver slipped 1.1 percent to $17.84, extending losses into the fifth session. Silver has shed nearly 4 percent so far this week after touching a five-month peak on Monday.

"Once it starts to reach these new highs and with prices above $18 as they were earlier in the week, it does present an opportunity of profit-taking for the less committed investors," said Butler.

Platinum slipped 0.6 percent to $971.95, while palladium fell 0.5 at $795.97 after rising more than 3 percent in the previous session.

(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by David Evans and Edmund Blair)