* Fed downplays weak Q1 economic growth, bullish on labour
* Gold saw worst 1-day drop since Nov 23 in previous session
* Silver hovers around near 4-month lows hit Wednesday
* Dollar index hits 2-week high
By Sethuraman N R
May 4 Gold fell to a six-week low on Thursday as
the dollar rose to a two-week high on expectations that the U.S.
Federal Reserve may raise interest rates as early as June.
Spot gold fell 0.3 percent to $1,234.52 per ounce by
0724 GMT, after hitting its lowest since March 21 at $1,232.60
earlier in the session.
It fell 1.5 percent on Wednesday - its worst single-day drop
since Nov. 23 - breaching both its 50-day and 200-day moving
U.S. gold futures fell more than 1 percent to
$1,235.40 an ounce.
The dollar index , which measures the greenback
against a basket of currencies, was up 0.2 percent at 99.400 on
Thursday, after touching a two-week high of 99.462
"With the safe-haven premium coming off gold, there was
enough to break the camel's back. Any small rallies are going to
get sold and gold is set for a deeper correction towards the
$1,200 level," said Jeffrey Halley, senior market analyst at
The U.S. Federal Reserve kept interest rates unchanged on
Wednesday, downplaying weak first-quarter economic growth while
emphasizing the strength of the labour market, signalling it was
still on track for two more rate rises this year.
"The price action in gold since mid-April has been
technically bearish. The Fed has basically put the ship back on
course with regard to their intentions to continue hiking
rates," said Halley.
Higher rates would reduce demand for non-interest bearing
gold and would also make the dollar-denominated metal more
expensive for buyers paying with other currencies.
Investors will now focus on Friday's monthly U.S. nonfarm
payrolls report for further clues on the Fed's likely rate hike
trajectory. Economists polled by Reuters expect U.S. employers
to have added 185,000 jobs in April, up from 98,000 in March.
"It seems like the decline (in precious metals) could
continue somewhat further," INTL FCStone analyst Edward Meir
said. "However, we do expect a period of consolidation to set in
fairly shortly and do not see a substantial drop below the
$1,200 level for gold anytime soon."
Spot silver rose 0.2 percent to $16.42, after hitting
a near four-month low of $16.37 on Wednesday. The grey metal has
fallen over 12 percent since touching a 5-month high of $18.65
in mid April.
Platinum was up 0.4 percent at $896.15. The metal
clung to its previous session low of $890.50, a level not seen
since late December.
Palladium fell 0.2 percent to $797.50, extending its
nearly 2 percent drop from the previous session.
(Reporting By Nallur Sethuraman in Bengaluru; Editing by Biju
Dwarakanath and Tom Hogue)