August 29, 2016 / 4:15 AM / 4 years ago

PRECIOUS-Gold slips on steady dollar with Fed rate hike in focus

* Yellen comments indicate U.S. rate hike could come soon
    * Spot gold may drop to $1,308 -technicals
    * Speculators increase gold long positions in week to Aug.
23

 (Updates prices)
    By Koustav Samanta
    Aug 29 (Reuters) - Gold edged lower on Monday as the dollar
got a boost after hawkish comments from Federal Reserve Chair
Janet Yellen left the door open to a U.S. interest rate hike as
early as next month.
    The case for raising U.S. interest rates has strengthened in
recent months due to improvements in the labour market and
expectations for moderate economic growth, Fed Chair Janet
Yellen said on Friday. 
    Spot gold had dipped 0.21 percent to $1,318.06 per
ounce at 0614 GMT. The metal closed last week down 1.5 percent.
    U.S. gold futures fell 0.35 percent to $1,321.20.
    "We think the pressure on gold will likely increase as we go
into September, as participants are now more willing to bet on a
rate hike given what they have gleaned from top Fed officials on
Friday," INTL FCStone analyst Edward Meir said in a note.
    Gold is highly-sensitive to rising U.S. interest rates,
which increase the opportunity cost of holding non-yielding
bullion while boosting the dollar, in which it is priced.
    Spot gold may drop to support at $1,308 per ounce, as
suggested by its wave pattern and a Fibonacci ratio analysis,
according to Reuters technical analyst Wang Tao. 
    "I think gold prices will still see support at about $1,300
despite what has been said in the Jackson Hole (Fed) symposium.
It is of no doubt that the rate hike expectations have gone up
for the year ahead," said OCBC Bank analyst Barnabas Gan.
    Given the fact that the U.S. presidential election is due
and the full blown consequences of Britain's vote to leave the
European Union remain to be seen, there is still some
risk-aversion in global markets and gold should pick up to
$1,350 by year-end, Gan added.
    Hedge funds and money managers increased their net long
position in COMEX gold contracts in the week to Aug. 23, while
they cut it in silver, U.S. Commodity Futures Trading Commission
(CFTC) data showed on Friday. 
    The dollar stood tall in Asian trading on Monday with the
dollar index, which tracks the greenback against a basket
of six rivals, steady at 95.564. Earlier in the session, the
index rose as high as 95.608, its loftiest since Aug. 16.
    Among other precious metals, spot silver dropped 0.81
percent to $18.46 per ounce. On Monday, the white metal fell as
far as $18.36, its lowest in nearly two months.

 (Reporting by Koustav Samanta in Bengaluru; Editing by Joseph
Radford)
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