June 21, 2018 / 9:43 AM / 8 months ago

PRECIOUS-Gold hits 6-month low as investors sell, dollar climbs

    * SPDR holdings down five percent since late April
    * Break of Fibonacci support may mean further losses

 (Updates prices)
    By Pratima Desai
    LONDON, June 21 (Reuters) - Gold prices sank to six-month
lows on Thursday as investors sold holdings in the physical
market and the dollar climbed due to expectations of higher
interest rates in the United States.
    Spot gold        was down 0.3 percent at $1,263.96 an ounce
at 1244 GMT but off a low of $1,261.36, its weakest level since
Dec. 20. 
    It has lost more than 7 percent since an April high above
$1,365 an ounce. U.S. gold futures         were down 0.8 percent
at $1,264.50 an ounce.
    Holdings of the largest gold-backed exchange traded fund
(ETF), the New York-listed SPDR Gold Trust       have fallen
nearly five percent to 26.645 million ounces since late April.
That trend is reflected in other U.S. based ETFs.
    "Uncertainty would normally fuel demand for gold as a safe
haven, which we would see in the physically backed products, but
instead we are seeing outflows from the U.S. products," said
Julius Baer analyst Carsten Menke.
    "From the perspective of a U.S. investor, focused on the
domestic market and economy, the threat from trade tensions is
much lower than in Europe. U.S. domestic consumption is a major
driver of growth and there isn't a problem there."
    That Menke said is why the Russell 2000 equity index       ,
which comprises of small U.S.-listed companies, and the Nasdaq
       index of technology firms, are at record highs.
    Meanwhile higher U.S. interest rates and the prospect of
further rises later this year have seen the dollar against a
basket of other major currencies        climb to its highest
since last July.       
    Higher interest rates would typically see investors divest
gold, which earns nothing and costs money to store and insure.
    A rising U.S. currency makes dollar-denominated commodities
more expensive for holders of other currencies, potentially
subduing demand for metals. This relationship is used by funds
to generate buy and sell signals using numerical models.
    Analysts at ActivTrades agree the gold price drop is partly
to do with the stronger dollar and say that $1,260 represents a
first support level.
    "If the decline continues, we would expect to see bullion
testing the lows reached last December, near $1,240."
    Traders say the break of support at $1,265, a Fibonacci
retracement level could mean further losses, but that momentum
indicators suggested gold was oversold and that a correction was
more likely.
    Other precious metals too came under selling pressure.
    Silver fell 0.2 percent to $16.24 an ounce, palladium       
lost 0.4 percent to $962.15 per ounce and platinum       
slipped 0.4 percent to $863.9 an ounce.

 (Editing by David Evans and Jason Neely)
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