May 19, 2016 / 4:20 AM / 2 years ago

PRECIOUS-Gold slips to 3-wk low on Fed rate hike expectations, firmer dollar

* Silver, palladium mark lowest in a month
    * Dollar index touches seven-week high
    * U.S. Fed officials to speak later in day

 (Adds gold hitting 3-wk low; updates other prices)
    By Vijaykumar Vedala
    BENGALURU, May 19 (Reuters) - Gold slipped to a three-week
low on Thursday, extending overnight losses after minutes from a
Federal Reserve policy meeting signalled the U.S. central bank
could raise rates as soon as next month, boosting the dollar to
multi-week highs.
    The U.S. economy could be ready for another interest rate
hike in June, according to the Fed's April policy meeting
minutes released on Wednesday. The central bank had lifted rates
in December for the first time in nearly a decade. 
    Gold is highly sensitive to rising rates, which increase the
opportunity cost of holding the metal.
    Spot gold had fallen 0.3 percent to $1,254.17 per
ounce by 0642 GMT, after earlier in the session dropping to its
lowest since April 28 at $1,251.65. It declined 1.7 percent the
day before. U.S. gold futures dipped 1.5 percent to
$1,255.40.    
    Spot silver and spot palladium slid to
one-month troughs, while spot platinum touched its lowest
in three weeks.         
    "Just as the prospect of extended low rates and a weaker
dollar provided commodities with considerable tailwinds earlier
in the year, the reverse could be at work now," said INTL
FCStone analyst Edward Meir.
    "As rising rates and a stronger dollar pressures prices
lower, gold could be a front-casualty in such a retreat." 
    Bullion has gained about 19 percent this year on speculation
that the Fed has slowed its expected pace of rate increases on
concerns over volatility in global markets. A possible hike in
June suggests the Fed is closer to tightening monetary policy
earlier than investors had expected.
    Fed Vice Chairs William Dudley and Stanley Fischer are due
to speak later in the day and the markets will be eager to get
more details on the Fed's thinking.
    Bullion investors will also be eyeing data on U.S. weekly
jobless claims on Thursday for trading cues.
    "I suspect people will use this opportunity to continue to
add (gold) allocations but at a much lower pace. So, it would
not have much of a huge impact on the global gold market," said
Richard Xu, fund manager of China's top gold exchange-traded
fund (ETF) HuaAn Gold.
    The dollar index, which measures the greenback
against a basket of six major currencies, soared to over
seven-week highs on Thursday. A stronger greenback makes
dollar-denominated gold more expensive for holders of other
currencies. 
    

 (Additional reporting by Koustav Samanta in Bengaluru; Editing
by Michael Perry and Joseph Radford)

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