February 28, 2018 / 5:18 AM / 21 days ago

PRECIOUS-Gold prices flat as outlook for faster U.S. interest hikes weigh

    * Spot gold may fall to $1,303/oz - technicals
    * Dollar index rises to highest since Feb. 9 
    * Fed's Powell strikes hawkish rate tone in 1st testimony

 (Adds comments, updates prices)
    By Eileen Soreng
    Feb 28 (Reuters) - Gold prices were little changed on
Wednesday after a more than 1 percent drop in the previous
session as investors interpreted comments from Federal Reserve
Chairman Jerome Powell to mean that the United States may raise
interest rates more frequently than anticipated this year.
    Spot gold        was almost unchanged at $1,317.90 an ounce
at 0758 GMT. It closed 1.1 percent lower on Tuesday after
hitting the lowest since Feb. 9 at $1,313.26.
    U.S. gold futures         were up 0.1 percent at $1,319.3
per ounce.
    "We might be entering a short-term period in the gold market
where we could see more dollar strength, higher bond rates and a
return to equity weakness, a familiar backdrop that could
pressure gold lower," INTL FCStone analyst Edward Meir said in a
    The dollar index       , which measures the greenback
against a basket of six major currencies, rose on Tuesday to its
highest since Feb. 9 after Powell gave testimony to the U.S.
Congress that indicated the possibility of four interest rate
hikes this year rather than the three that market participants
are expecting.              
    The dollar index was up 0.1 percent at 90.403 on Wednesday.
    "Longer-term we see upside potential for gold coming from
increased U.S. inflation and any renewed volatility in equity
markets," said Evan Metcalf, director of portfolio management
and head of operations at ETF Securities.
    Powell noted in his speech that recent data had strengthened
his confidence in inflation.               
    Inflation is seen as gold-positive, because bullion is seen
as a safe store of value when price pressures rise, however
lifting interest rates to fight inflation makes the non-yielding
metal less attractive.
    Spot gold is expected to break a support at $1,317 per ounce
and fall more to the next support at $1,303, as suggested by its
wave pattern and a projection analysis, according to Reuters
technical analyst Wang Tao.         
    "People are looking to buy gold on dips, so I think it will
be supported down at $1,300," said a Hong Kong-based trader. 
    Meanwhile, Asian shares extended losses on Wednesday Chinese
and Japanese manufacturing data revived worries about global
economic growth, adding to the negative market sentiment
triggered by Powell's speech.            
    Among other precious metals, silver        fell 0.2 percent
to $16.40 an ounce.
    Palladium        was up 1.1 percent at $1,047.20 per ounce,
while platinum        fell 0.3 percent to $980.30 per ounce,
after dropping to a two-week low of $974. 

 (Additional reporting by Nithin Prasad in Bengaluru; Editing by
Christian Schmollinger and Subhranshu Sahu)
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