September 21, 2017 / 10:16 AM / a year ago

PRECIOUS-Gold slips to near 4-week low as Fed flags December rate hike

    * Fed indicates one more rate hike this year
    * Also plans to trim $4.2 trillion in asset holdings
    * GRAPHIC-2017 asset returns:

 (Updates prices, adds comment)
    By Jan Harvey
    LONDON, Sept 21 (Reuters) - Gold fell nearly 1 percent to
its lowest in almost four weeks on Thursday, shrugging off
further weakness in the dollar, after the Federal Reserve
signalled it was on track to raise U.S. interest rates again in
    The metal is highly sensitive to rising U.S. rates, which
boost the cost of holding non-yielding bullion relative to other
assets, while lifting the dollar, in which it is priced.
    Spot gold        was down 0.7 percent at $1,291.95 an ounce
at 1355 GMT, having earlier touched its lowest since late August
at $1,287.61. U.S. gold futures        for December delivery
were down $21.50 an ounce at $1,294.90.
    "It should be an interesting time in the run up to
mid-December as we see the Fed prepare to raise rates, reduce
the balance sheet at the same time as a tense negotiation over
the (U.S.) debt ceiling, plus fiscal spending plans and tax cuts
are debated in Congress," Mitsubishi analyst Jonathan Butler
    Volatile conditions could help gold after its correction, he
    In a statement following its latest two-day policy meeting,
the U.S. central bank indicated it still expected one more
increase by the end of the year in spite of a recent run of soft
inflation readings.             
    It also said it planned to trim the $4.2 trillion in asset
holdings that it had built up in the wake of the 2008 financial
    Gold has pulled back more than $60 an ounce since hitting
its highest in more than a year earlier this month at $1,357.54.
    "The opportunity cost of holding gold seems to be going up
now, and that's bad news for gold," LBBW's head of commodity
research Frank Schallenberger said. "We went up to $1,350 so
quickly, and now we have consolidation. With the wording from
the Fed, that could go on for a while."
    "We will head down to $1,250 in the next couple of weeks,
and then we'll think again (once) people have digested the news
on interest rates," he said.
    The dollar hit a two-month high versus the yen after the Fed
decision, but later fell against the euro after European Central
Bank President Mario Draghi said monetary policy was not the
right instrument to address financial imbalances in the euro
    Silver        was down 1.1 percent at $16.94 an ounce, after
falling to its lowest since Aug. 25 earlier in the session at
    Platinum        was 0.5 percent lower at $936.10 an ounce,
after touching a near eight-week low of $925 earlier in the day,
while palladium        was up 0.5 pct to $914.60 an ounce.

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
Mark Potter and Jane Merriman)
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