March 7, 2017 / 3:47 PM / 5 months ago

UPDATE 1-Gold shares drag on South Africa's bourse, rand strong

* Rand shrugs off weak GDP

* Bonds see higher demand

* Gold shares lead decliners (Updates prices)

JOHANNESBURG, March 7 (Reuters) - South African stocks edged lower on Tuesday, led by gold mining shares as the price of the metal slipped to its weakest level in four weeks, while the rand gained, shrugging off a fourth quarter contraction in gross domestic product.

The benchmark JSE Top-40 index was 0.19 percent lower at 44,340 and the broader All-share index dipped 0.23 percent to 51,377.

Gold mining shares took the most points off the index as expectations for the Federal Reserve to push ahead with a U.S. rate increase this month pressured the precious metal.

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar in which it is priced.

Gold Fields was 3.42 percent lower at 40.10, making it the biggest decliner on the Top-40 index. Rival AngloGold followed with 2.60 percent decline to 131.57 rand.

Platinum prices also took a hit, falling 1.08 percent to $964.25. Lonmin, the world's third largest platinum producer, led the overall decliners, falling 9.29 percent to 14.64 rand.

The company is facing doubts over its 2017 production targets, and on Monday it announced the resignation of its chief operating officer.

On the forex market, the rand brushed aside the fourth- quarter contraction in gross domestic product to inch close to its firmest level in a week, helped by steadying commodity prices and strong demand for local bonds.

By 1540 GMT the rand had strengthened 0.15 percent to 12.9900 per dollar from an overnight close of 13.0100, outperforming a number of its emerging market peers as it rallied to its best level since March 2 mid-session.

Analysts said the weak economic growth figures were somewhat expected and partly ignored by the market, with the rand's gains supported by demand for local bonds and the attractiveness of the unit as a carry trade.

"The GDP data was soft, and we're still growing too slowly for an emerging market. But the market has digested the U.S. rate hike expected next week, and some of the dollar strength from last week is beginning to unwind," said Shaun Murison, analyst at IG Group.

The economy contracted 0.3 percent in the final three months of 2016 as mining and manufacturing output shrank, reigniting concerns about falling government revenues and the country's chances of holding on to its investment rate credit rating.

Bonds rallied, with the yield on the benchmark paper due in 2026 falling 4 basis points to 8.64 percent, its lowest since Feb. 17. (Reporting by Nqobile Dludla and Mfuneko Toyana; Editing by Mark Trevelyan)

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