June 30, 2017 / 9:47 AM / 5 months ago

PRECIOUS-Gold heads for first monthly loss this year

    * Gold down 2 pct in June and 0.4 pct in Q2
    * Gold still up 8 pct in H1 after strong start to year
    * Silver worst Q2 performer, down 9 pct; palladium up 5.6
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices)
    By Jan Harvey
    LONDON, June 30 (Reuters) - Gold eased on Friday to stay on
track for its first monthly loss this year, as hints from
leading central banks that the era of easy money may be coming
to a close pushed bond yields higher.
    The metal is highly sensitive to rising yields, which lift
the opportunity cost of holding non-interest bearing bullion. 
    Spot gold        was down 0.2 percent at $1,243.40 an ounce
at 1145 GMT, while U.S. gold futures        for August delivery
were $2.40 an ounce lower at $1,243.40. 
    Spot prices have fallen nearly 2 percent so far in June, and
are down 0.4 percent on a quarterly basis. After a strong
performance in the first quarter, they are still set to end the
first half of the year up 8 percent. 
    Comments from the euro zone, British and Canadian central
banks this week indicated that quantitative easing programmes
put in place in the wake of the financial crisis may be being
wound up, leading to a gradual normalisation of interest rates.
    That comes in the wake of the Federal Reserve's decision to
hike U.S. interest rates at its June meeting, and its indication
that it will press ahead with plans to shrink its $4.5 trillion
in bond holdings.             
    "We still have two rate hikes factored in for the Fed in the
second half of the year, and we expect some reduction of the
balance sheet," Capital Economics analyst Simona Gambarini said.
    "At the same time, in the UK and Europe, although policy
will remain loose for some time, it will start to turn the other
way," she added. "So all in all, it doesn't bode so well for
gold prices." 
    Germany's benchmark 10-year bond yield was heading for its
biggest weekly jump since late 2015, topping a week in which
yields across the euro zone have soared as investors brace for
an end to the era of ultra-easy monetary policy.          
    On the other side of the Atlantic, benchmark U.S. Treasury
yields hit six-week highs on Thursday.      
    Rising yields helped offset the positive impact of a weaker
dollar on gold. The U.S. currency was on course for its worst
quarter in seven years, recovering only marginally against major
peers after a week of hawkish central bank rhetoric.       
    "The U.S. dollar has softened, though this does not appear
to have had the positive effect on price as we might have
hoped," MKS said in a note. 
    Among other precious metals, silver        was down 0.5
percent at $16.55 an ounce. Silver has seen the biggest fall
among major precious metals this quarter, down 9 percent, while
palladium        is the best performer, up 5.6 percent. 
    Palladium was down 0.6 percent at $842.23 an ounce on
Friday, while platinum        was up 0.3 percent at $922.90. 

 (Reporting by Jan Harvey; additional reporting by Vijaykumar
Vedala and Nithin Prasad in Bengaluru; editing by Mark Potter
and Jason Neely)

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