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Gold extends fall as safe-haven buying slows amid U.S. rate hike view

BENGALURU (Reuters) - Gold prices extended fall on Wednesday to a six-and-a-half-month low as the U.S. dollar steadied and investors increasingly turned to other safe-haven assets, amid expectations of more interest rate hikes by the U.S. Federal Reserve.

FILE PHOTO: A salesperson arranges 24K gold bracelets for Chinese weddings at Chow Tai Fook Jewellery store in Hong Kong, China December 14, 2017. REUTERS/Tyrone Siu/File Photo

Spot gold fell for a third straight session and was down 0.2 percent at $1,255.88 an ounce, as of 0408 GMT, after hitting its lowest since mid-December at $1,253 earlier in the session.

U.S. gold futures for August delivery were 0.2 percent lower at $1,257.50 per ounce.

“Gold does not seem to be benefiting from any risks relating to rising trade tensions, but is experiencing declines from a firmer dollar and any improvement in equity markets,” said John Sharma, an economist at National Australia Bank.

“It appears that investors are seeking safe havens in the U.S. treasuries and currencies such as the Japanese Yen. Near term, gold will remain under pressure.”

The dollar held steady against a basket of currencies, having gained 0.4 percent overnight to snap four sessions of falls to a two-week low.

However, it was down 0.2 percent at 109.90 against the yen, often sought in times of market turmoil and political tensions, after earlier touching 110.20.

A stronger dollar and higher U.S. interest rates reduce demand for non-interest bearing gold as the metal becomes more expensive for holders of other currencies.

The U.S. House of Representatives overwhelmingly passed a bill on Tuesday to tighten foreign investment rules, spurred by bipartisan concerns about Chinese bids to acquire sophisticated U.S. technology.

U.S. President Donald Trump endorsed Treasury Secretary Steven Mnuchin’s measured approach to restrict Chinese investments in U.S. technology companies.

The strong dollar and the prospect of a fourth rate hike have tempered gold prices, said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Dallas Federal Reserve Bank President Robert Kaplan said he believes the U.S. central bank’s monetary policy is still accommodative and suggested the Fed could raise rates at least two more times.

However, Atlanta Fed bank president Raphael Bostic said intensifying trade tensions over the last week have raised risks to the U.S. economy, adding that he may rule out a fourth rate increase for the year if the trade war gets worse.

If the trade war continues, it will impact the global economy and could eventually push up gold prices, said Leung.

Meanwhile, silver fell 0.2 percent to $16.23 an ounce. Platinum declined 0.3 percent to $862.95 an ounce, while palladium was 0.6 percent higher at $962.10.

Reporting by Karen Rodrigues in Bengaluru; editing by Richard Pullin and Subhranshu Sahu