May 4, 2017 / 10:54 AM / 9 months ago

PRECIOUS-Gold prices hit six-week low on rate hike expectations

    * Gold support around $1,221, the 100-day moving average
    * Bearish catalysts have yet to play out - Goldman

 (Updates prices; adds comment, second byline, NEW YORK
    By Marcy Nicholson and Pratima Desai
    NEW YORK/LONDON, May 4 (Reuters) - Gold prices fell to the
lowest in more than six weeks on Thursday, on expectations of
further U.S. interest rate increases this year and receding
political uncertainty in Europe.
    Spot gold        was down 0.8 percent at $1,227.94 an ounce
by 3:02 p.m. EDT (1902 GMT) after touching $1,225.20, the lowest
since March 17, and extending losses below the 50- and 200-day
moving averages. Support was seen around $1,221, the 100-day
moving average.
    U.S. gold futures         settled down 1.6 percent at
    "The recent modest rise in U.S. real yields and thereby also
in the U.S. dollar has resulted in downward pressure on gold
prices. What is more, optimism about an EU-friendly election
outcome in France has calmed investor's nerves," said ABN Amro
analyst Georgette Boele.
    "As a result, investment assets that have safe haven
characteristics, such as the yen and gold, have been sold off."
    Expectations that centrist Emmanuel Macron will win the
French presidential election on Sunday were reinforced in a TV
debate with the far-right's Marine Le Pen.             
    The dollar index        initially strengthened after the
U.S. Federal Reserve played down any threats to this year's
planned rate increases, supporting forecasts of another move in
    Higher U.S. interest rates are a negative for gold, which
earns nothing and costs money to insure and store.
    Bullion held its losses as the U.S. dollar turned lower.
    The focus is now shifting to Friday's U.S. non-farm payrolls
report for April, which could reinforce expectations of higher
U.S. interest rates in June.
    "In the very near term we continue to expect that gold will
trade moderately lower - our three-month target is $1,200/oz, as
a number of bearish catalysts have yet to fully play out,"
Goldman Sachs analysts said in a note.
    Goldman said near-term downside risks for gold included more
U.S. rate increases than the market is expecting and the Fed
starting to shrink its balance sheet on the back of possible
U.S. tax cuts and solid U.S. and global economic growth.
    Central bank gold demand hit its lowest in nearly six years
in the first quarter as Chinese buying dried up, the World Gold
Council said in a report.             
    Silver        was down 0.6 percent at $16.295, having hit a
four-month low of $16.17. It has fallen around 13 percent since
reaching a five-month high of $18.65 in mid-April.
    Platinum        gained 1 percent to $901.20, after touching
$889.10, its lowest since December.
    Palladium        rose by 0.4 percent to $802.10. 

 (Additional reporting By Nallur Sethuraman in Bengaluru;
Editing by Edmund Blair and Dale Hudson)
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