June 21, 2018 / 4:41 AM / a month ago

PRECIOUS-Gold prices drop to 6-mth low on strong dollar, U.S. rate outlook

    * Spot gold may drop to $1,258/oz -technicals
    * Silver, palladium hit 1-1/2-month low

 (Updates prices)
    By Karen Rodrigues
    BENGALURU, June 21 (Reuters) - Gold prices posted a
six-month low on Thursday, weighed down by a firm dollar and as
the U.S. Federal Reserve Chair kept its outlook for higher
interest rates. 
    Spot gold        fell 0.4 percent to $1,262.88 an ounce by
0637 GMT. It hit its lowest since Dec. 20 at $1,261.36 earlier,
having lost about 3 percent over the last five sessions.
    U.S. gold futures         for August delivery were down 0.8
percent at $1,264.50 per ounce.
    "Precious metal (gold) is firmly in a downtrend and this is
mainly due to the strength in the dollar index which is trading
at a significant level," said ThinkMarkets chief market analyst
Naeem Aslam.
    The dollar held near an 11-month high against a basket of
currencies on Thursday, supported by a rise in U.S. yields,
while the pound was at its lowest level since November 2017
ahead of a Bank of England monetary policy decision.       
    A stronger greenback makes dollar-denominated gold more
expensive for holders of other currencies.
    The dollar strength follows a remark from Fed Chairman
Jerome Powell yesterday and that is driving gold down, said
Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank.
    Powell on Wednesday said the U.S. jobs market did not appear
overly tight and the Federal Reserve should continue with a
gradual pace of interest rate rises to balance the bank's
employment and inflation goals in a strong economy.             
    Meanwhile, a developing trade war between the United States
and China is weighing on business confidence and could force
central banks to downgrade their outlooks, some of the world's
most powerful monetary policymakers said on Wednesday at a
meeting in Portugal of central bank heads.             
             
    Gold prices, which can benefit in times of uncertainty,
failed to gain so far this week, despite the ongoing trade war. 
  
    Spot gold may drop to $1,258 per ounce, as a support at
$1,268 does not seem to hold, said Reuters technicals analyst
Wang Tao.         
    In other precious metals, silver        fell 0.5 percent to
$16.18 an ounce, having earlier touched its lowest since early
May at $16.16.
    Palladium        was 0.3 percent lower at $961.47 per ounce.
It hit $959 earlier in the session, its lowest since May 4. 
    Platinum        slid 0.9 percent to $857.49 an ounce. It
touched $854.50, its lowest since Feb. 3, 2016, in the previous
session.

 (Reporting by Karen Rodrigues and Apeksha Nair in BENGALURU;
Editing by Joseph Radford and Tom Hogue)
  
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