January 4, 2018 / 1:23 AM / in 2 months

PRECIOUS-Gold holds losses as U.S. rate hike views boost dollar

    Jan 4 (Reuters) - Gold prices eased early on Thursday,
extending losses from the previous session as the precious metal
retreated from more than 3-1/2-month highs due to a firmer
dollar on expectations of further U.S. interest rate hikes.
    
    FUNDAMENTALS    
    * Spot gold        was down 0.3 percent at $1,308.83 an
ounce at 0058 GMT.
    * The yellow metal hit its highest since Sept. 15 at
$1,321.33 on Wednesday, but dropped as the dollar recovered from
over 3-month lows. It fell further after the Federal Reserve
released minutes of its December policy meeting which increased
expectations of more U.S. rate hikes.
    * The reversal on Wednesday saw spot gold post its first day
of losses in nearly three weeks.
    * Although the Fed's meeting minutes showed some
disagreement between policy hawks and doves, "the tax cuts were
seen as very beneficial for economy. A higher GDP and higher
consumer spending would boost the possibility for more rate
hikes, which would put pressure on gold," said Bob Haberkorn,
senior market strategist for RJO Futures in Chicago.
            
    * Gold is highly sensitive to rising U.S. interest rates
because it increases the opportunity cost of holding
non-yielding bullion, while boosting the dollar, in which it is
priced.
    * U.S. gold futures         were down 0.6 percent at
$1,310.60 an ounce. 
    * The short-term technical outlook and profit taking were
also seen pressuring gold after the precious metal rallied $85
from nearly 5-month lows in mid-December. 
    * Spot gold's 14-day relative strength index (RSI) touched
75 on Tuesday, it highest since September 2017. An RSI above 70
indicates a commodity is overbought and could herald a price
correction, technical analysts said.
    * The dollar index       , which measures the greenback
against a basket of six major currencies, was up 0.1 percent at
92.246 after falling to a more than three-month low on Tuesday.
      
    * Asian shares scaled a 10-year high on Thursday as solid
economic data from the United States and Germany reinforced
investors' optimism while oil prices hovered at 2-1/2-year high
with unrest in Iran stoking supply disruption concerns.
           
    * U.S. factory activity increased more than expected in
December, boosted by a surge in new orders growth, in a further
sign of strong economic momentum at the end of 2017.
            
    * In Germany, Europe's economic power house, the
unemployment rate hit a record low of 5.5 percent in December,
underpinning a broad-based economic upswing.             
    
    DATA AHEAD
    
    0145  China      Service sector PMI         Dec
    0850  France     Final composite PMI        Dec
    0850  France     Final service sector PMI   Dec
    0855  Germany    Final composite PMI        Dec
    0855  Germany    Final service sector PMI   Dec
    0900  Euro Zone  Final Service sector PMI   Dec
    0900  Euro Zone  Final composite PMI        Dec
    0930  U.K.       Mortgage approvals         Nov 
    0930  U.K.       Service sector PMI         Dec 
    1230  U.S.       Companies' planned layoffs Dec 
    1315  U.S.       ADP employment report      Dec
    1445  U.S.       Final service sector PMI   Dec 
    1445  U.S.       Final manufacturing PMI    Dec

 (Reporting by Nallur Sethuraman in Bengaluru; editing by
Richard Pullin)
  
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