March 17, 2017 / 3:47 AM / 3 years ago

PRECIOUS-Gold steady, heads for 1st weekly gain in three as Fed hurts dollar

    * Gold up 1.8 pct this week on Fed statement
    * Dutch election result dents gold's haven appeal
    * SPDR holdings drop after three sessions of gains

 (Recasts, updates prices)
    By Sethuraman N R
    March 17 (Reuters) - Gold prices held steady on Friday and
were on course for their first weekly gain in three, as the
dollar plumbed to fresh five-week lows after the U.S. central
bank's signal of a slower pace of rate increases this year
disappointed dollar bulls. 
    The U.S. Federal Reserve delivered an interest rate increase
earlier this week as widely anticipated, but did not alter its
earlier forecast for a total of three rate increases this year,
dashing hopes of dollar bulls who had waited for hints of a
possible fourth hike in 2017.             
    The dollar index       , which measures the greenback
against a basket of currencies, hit a fresh 5-week low of
100.160 on Friday.
    Spot gold        was nearly unchanged at $1,226.31 per ounce
by 0739 GMT after hitting its highest since March 6 in the
previous session, while U.S. gold futures         were little
changed at $1,226.20.
    "What's happening now is just an inverse trade against the
dollar. If there is a risk-averse sentiment, we can see both the
gold and dollar rising together, especially after a Fed rate
hike," said Jiang Shu, chief analyst at Shandong Gold Group.
    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.
    "The market is not sure about the timing of a rate hike in
the future. I would expect gold to trade in a wide band of
$1,190 - $1,230 between the French elections and the U.S.
Federal Reserve meeting in May," Shu said.
    Analysts said the election this week in Holland had calmed
concerns over political risk in Europe, as Dutch centre-right
Prime Minister Mark Rutte fought off the challenge of anti-Islam
and anti-EU rival Geert Wilders.             
    Rutte's victory was hailed across Europe by governments
facing a rising wave of nationalism, denting gold's safe-haven
    Holdings of SPDR Gold Trust       fell 0.28 percent to
837.06 tonnes on Thursday from 839.43 tonnes on Wednesday. The
world's largest gold-backed exchange-traded fund saw outflows
after three straight session of inflows this week.          
    The G-20 meeting of finance ministers and central bankers
this weekend could however lend a potential safe-haven bid to
gold, said Jeffrey Halley, senior market analyst at OANDA.
    "This meeting has the potential to be more heated so to
speak, with some very militant senior members of the new Trump
administration in attendance and looking to shake the global
trade tree," he said.
    Spot gold may test a support at $1,221 per ounce, a break
below which could cause a loss to $1,210, according to Reuters
technical analyst Wang Tao.             
    Spot silver        dropped 0.3 percent to $17.23 an ounce.
The metal hit its highest since March 7 in the prior session. 
    Platinum        rose 0.2 percent to $954.90, while palladium
       was up 0.5 percent at $767.65.

 (Reporting by Nallur Sethuraman in Bengaluru; Editing by Vyas
Mohan and Biju Dwarakanath)
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