February 21, 2017 / 3:49 AM / 6 months ago

PRECIOUS-Gold drops as investors await hints on U.S. rate hikes

    * Spot gold may break support at $1,233/oz -technicals
    * Holdings of SPDR Gold Trust fall 0.3 pct

 (Adds quotes; updates prices)
    By Arpan Varghese
    Feb 21 (Reuters) - Gold prices fell as the dollar gained on
Tuesday, with investors waiting for clues on the timing of any
increase in U.S. interest rates from minutes of a Federal
Reserve meeting and in a series of speeches by Fed officials
this week.
    The heads of five regional U.S. Fed branches are scheduled
to speak this week. In addition, Fed Board Governor Jerome
Powell speaks on Wednesday, when minutes of the last policy
meeting are also due.            
    Spot gold        fell 0.4 percent to $1,233.21 per ounce by
0550 GMT, while U.S. gold futures         lost 0.4 percent, at 
$1,234.60. 
    "People are awaiting direction from the minutes of the last
FOMC (Federal Open Market Committee) meeting. If it offers any
significant indication that the Fed can raise rates in the next
meeting, there will be a negative impact on gold," said Hareesh
V, head of research at Geofin Comtrade Ltd. "Otherwise, prices
can go higher again because of global uncertainty."
    Gold is highly-sensitive to rising U.S. interest rates, as
it increases the opportunity cost of holding non-yielding
bullion, while also boosting the dollar.
    The dollar index        was up 0.2 percent at 101.16 as of
0616 GMT.
    "Fed chief Janet Yellen recently signalled that the U.S.
economy was prepared for an early increase in key interest
rates. Economic data confirming this assessment will put a
strain on the gold price in the coming weeks and months,"
Heraeus Metal Management said in a note.
    Political uncertainty including lingering doubts over U.S.
President Donald Trump's policies and the potential impact on
the Fed's strategy, as well as elections in France and
Netherlands, has offered broad support for the yellow metal,
which has risen about 7 percent this year.
    "We anticipate that the generally positive sentiment in the
gold market remains intact," analysts at Heraeus said.    
    Investor appetite has however shown signs of easing since
gold hit a three-month high on Feb. 8. 
    Data also showed on Friday that speculators cut their net
long position in COMEX gold for the first time in three weeks in
the week to Feb. 14.                    
    The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust                      , reported an outflow of 2.4
tonnes on Friday, the first in nearly four weeks. 
    Spot gold        may break a support at $1,233 per ounce,
according to Reuters technical analyst Wang Tao.              
    Meanwhile, spot silver        fell 0.3 percent to $17.96 per
ounce, while platinum        prices were down 0.2 percent, at
$995.90.
    Palladium        fell 0.5 percent to $768.33 per ounce. 

 (Reporting by Arpan Varghese in Bengaluru; Editing by Tom Hogue
and Biju Dwarakanath)
  

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