September 27, 2017 / 10:41 AM / 2 years ago

PRECIOUS-Gold hits 1-month low as Fed rate hike hint drives dollar

    * Dollar index hits highest in a month
    * Palladium prices rise to first premium over platinum in 16
    * Silver hits two-month low

 (Updates prices; adds comment, second byline, NEW YORK
    By Renita D. Young and Maytaal Angel
    NEW YORK/LONDON, Sept 27 (Reuters) - Heightened expectations
that the U.S. Federal Reserve will raise interest rates again
this year drove gold to a one-month low on Wednesday, extending
losses after the biggest one-day loss in almost two years during
the previous session. 
    Palladium prices rose to a premium over platinum for the
first time since 2001 as speculators piled into the
    Spot gold        was down 0.7 percent at $1,284.61 per ounce
at 2:07 p.m. EDT (1807 GMT), earlier hitting its lowest since
Aug. 25 at $1,282.23. 
    U.S. gold futures         for December delivery settled down
$13.90, or 1.07 percent, at $1,287.80 per ounce. 
    The U.S. dollar touched a one-month high against a basket of
currencies        after Federal Reserve chief Janet Yellen said
on Tuesday it would be "imprudent" to keep rates on hold until
U.S. inflation hits 2 percent.             
    That continued to pressure bullion prices into a second day,
as traders awaited more statements from Fed officials this week.
    "I think they will most likely tell us that the Fed is ready
to pull the trigger,” said Bart Melek, head of commodity
strategy at TD Securities in Toronto, Canada.
    Markets are pricing in a 76 percent chance the Fed will
raise borrowing costs in December, compared with less than 20
percent only a month ago.
    Gold is highly sensitive to rising U.S. interest rates, as
they increase the opportunity cost of holding non-yielding
bullion versus the dollar. 
    Strong U.S. data on durable goods orders also pressured
gold, Melek said.             
    "That generally has traders confident that the U.S. economy
is actually doing OK. That implies that the Fed may be ready to
hike the rates," Melek said of U.S. durable goods orders. 
    Profit-taking "from shorter-term technically-oriented
traders" also weighed on gold, said Jeffrey Christian, managing
partner of CPM Group in New York.
    U.S. stocks pared gains Wednesday after U.S. President
Donald Trump's administration called for slashing tax rates.
    Despite its headwinds, lingering U.S.-North Korea tensions
limited losses in gold, said Yuichi Ikemizu at ICBC Standard
Bank in Tokyo. 
    "I think the (North Korea) situation is more serious than
the Fed's policies. So gold is supported around here and I
expect prices to go back up to $1,300."  
    Silver        was flat at $16.80 per ounce, having dropped
2.4 percent in the previous session, its biggest one day fall
since mid-August. Earlier, the metal hit its lowest since
mid-August at $16.69. 
    Platinum        fell 0.2 percent at $920.20 per ounce, after
hitting $912.50, its lowest since mid-July.
    Palladium        rose 1.4 percent to $926.88 per ounce.

 (Additional reporting by Nithin Prasad and Arpan Varghese in
Bengaluru; Editing by Alexander Smith and Tom Brown)
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