October 11, 2016 / 10:01 AM / a year ago

PRECIOUS-Gold slips on higher dollar as prospect of Dec U.S. rate hike increases

* September Fed policy meeting minutes due on Wed
    * Platinum, palladium fall to multi-month lows
    * GRAPHIC-2016 asset returns: reut.rs/1WAiOSC

 (New throughout, updates prices, market activity and comments,
adds second byline, NEW YORK dateline)
    By Marcy Nicholson and Clara Denina 
    NEW YORK/LONDON, Oct 11 (Reuters) - Gold prices fell on
Tuesday as the dollar strengthened on increasing bets that the
Federal Reserve will raise U.S. interest rates in December.
    Chicago Fed President Charles Evans said in Sydney he "could
be fine" with raising rates in December, but would first like to
see how the economy and inflation progressed. 
    Traders have priced in a 70 percent chance that the Fed will
raise rates at a Dec. 13-14 meeting, up from 66 percent early on
Friday, according to CME Group's FedWatch tool.
    Spot gold had dropped 0.3 percent at $1,255.7 an
ounce by 1:47 p.m. EDT (1747 GMT), while U.S. gold futures
 settled down 0.4 percent at $1,255.9 per ounce. 
    "A stronger dollar is weighing on most commodities and there
is the outlook for the Fed potentially raising rates in
December, which is damaging for gold," ING commodity strategist
Warren Patterson said.
    On Friday, bullion touched a four-month low of $1,241.20 an
ounce after forecast-beating U.S. data and comments from Fed
officials saying there was a strong case for raising rates.
    The dollar hit an 11-week high against a basket of
six major currencies, making dollar-denominated gold more
expensive for holders of other currencies. 
    "The market's starting to get some belief that the Fed's
going to follow through," said Rob Haworth, senior investment
strategist for U.S. Bank Wealth management in Seattle, referring
to expectations for a rate hike in December.
    "Everything still seems to be pointing to slow growth. I
think the gold market is coming to grips with that."
    Since gold pays no interest, the precious metal is highly
sensitive to increases in U.S. interest rates.
    Investors awaited Wednesday's release of minutes of the
latest Federal Reserve Open Market Committee meeting to see how
close the central bank came last month to hiking rates. 
    Among other precious metals, spot platinum was down
1.5 percent at $946.25 an ounce after falling to a six-month low
at $941.90. 
    Palladium was down 2.7 percent at $646.75 after
falling to the lowest in nearly three months at $644.97 an
ounce.
    UBS Wealth Management Research said in a note that it
introduced a new overweight palladium versus underweight U.S.
natural gas position in its relative commodity preference.
   "The white metal is likely to benefit from strong car sales,
while milder temperatures are likely to weigh on US natural gas
prices," UBS said.
    Silver was down 0.9 percent at $17.47.

    
 (Addional reporting by Swati Verma in Bengaluru; editing by
Adrian Croft and David Gregorio)

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