September 12, 2016 / 9:50 AM / a year ago

PRECIOUS-Gold erases losses after U.S. rate hike expectations ease

* Gold turns slightly positive after dovish Fed comment
    * Speculators raise bullish stance on gold and silver
    * Platinum, palladium tap lowest prices since July

 (Recasts, updates throughout; adds comment, second byline, NEW
YORK dateline)
    By Marcy Nicholson and Zandi Shabalala
    NEW YORK/LONDON, Sept 12 (Reuters) - Gold steadied on
Monday, recovering from earlier weakness after dovish comments
from U.S. Federal Reserve policymakers lowered expectations for
an interest rate hike this month, and the dollar fell. 
    U.S. interest rate futures prices rose, diminishing the
implied probability of a rate hike by the U.S. central bank next
week, after Fed Governor Lael Brainard warned against a rush to
raise interest rates. 
    Brainard's comments came on the same day that Minneapolis
Fed President Neel Kashkari said low inflation means there is no
pressure to aggressively raise rates while Atlanta Fed President
Dennis Lockhart said current economic conditions warrant a
"serious discussion" of whether to raise rates next
week.  
    The Fed will have a two-day meeting next week. 
    Spot gold was up 0.05 percent at $1,328.32 an ounce
by 3:12 p.m EDT (1912 GMT), with U.S. gold futures 
settling down 0.7 percent at $1,325.60 per ounce. 
    U.S stock prices rose after Fed policymakers expressed
caution about the need to raise U.S. interest rates, sharply
cutting into losses in European equities. 
    "Her comments clearly were on the dovish side and gold did
turn from its lowest levels," said Bill O'Neill, co-founder of
LOGIC Advisors, referring to Brainard.
    "Everything has turned toward the idea that now there's not
going to be a rate hike (in September). The emotion of it
day-to-day is extremely high."
    The change in market sentiment followed Boston Fed President
Eric Rosengren's hawkish comments on Friday, when the chances of
a rate rise in September were seen at 30 percent, up from 24
percent before his comments.  
    "We retain our call for the next hike to be in December,
with Brainard a potential dissenter when that comes," said Avery
Shenfield, managing director and chief economist for CIBC
Capital Markets.
    Hedge funds and money managers increased their net long
position in COMEX gold contracts to a nine-week high in the week
to Sept. 6 and also raised a bullish stance in silver, U.S.
Commodity Futures Trading Commission data showed on Friday.
 
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings fell 1.12 percent to
939.94 tonnes on Friday. 
    Silver rose 0.5 percent to $19.13 an ounce, having
touched its lowest since Sept. 1 at $18.69.
    Platinum fell 0.7 percent to $1,050.10 an ounce,
after falling to $1,033.45, the lowest since July 1. Palladium
 was down 1.7 percent at $663.22, having tapped $650.15,
the lowest since July 20.

    
 (Additional reporting by Swati Verma and Nallur Sethuraman in
Bengaluru; Editing by David Goodman and Marguerita Choy)

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