June 6, 2018 / 9:43 AM / 2 months ago

PRECIOUS-Gold steady, weaker dollar provides support

    * Geopolitics providing only limited support to gold
-analysts
    * SPDR holdings dip to lowest in nearly 3 months

 (Updates prices)
    By Eric Onstad
    LONDON, June 6 (Reuters) - Gold steadied on Wednesday,
supported by a weaker dollar and trade tensions as the market
looked ahead to an expected U.S. rate hike next week when the
Federal Reserve meets.
    Spot gold        was little changed at $1,295.76 per ounce
at 1314 GMT while U.S. gold futures         for August delivery
dipped 0.2 percent to $1,300.10 per ounce.    
    "Investors are sitting on the fence, they only want to be
involved when we break out of the range," said Ole Hansen, head
of commodity strategy at Saxo Bank in Copenhagen.
    Gold was trapped between the 200-day moving average at
around $1,308 and $1,286 on the downside, he added.
    The case for hiking U.S. interest rates next week was
bolstered on Tuesday when data showed U.S. services sector
activity accelerated in May and job openings rose to a record
high in April.             
    Gold, which is a non-interest-paying asset, could see demand
take a hit from higher rates.    
    Once the rate decision has been taken, gold is likely to
move higher, Hansen said. "There is potential for gold to follow
the same pattern it's taken after recent rate hikes: defensive
before, only to rally afterwards."    
    A softer greenback provided support to dollar-denominated
gold after the euro rose to a 10-day high when European Central
Bank officials said an end to the bank's bond-buying programme
by the end of 2018 was plausible.       
    Potential investors in gold were also waiting to see how
trade tensions play out since many believe recent U.S. tariffs
are negotiating tactics, analysts said.
    "Investor interest is mixed towards gold in the current
environment, with geopolitical tensions attracting reduced flows
and limiting the downside risk rather than propelling prices
higher," Standard Chartered said in a note on Tuesday. 
    Holdings of SPDR Gold Trust      , the world's largest
gold-backed exchange-traded fund, fell 0.03 percent to 836.13
tonnes on Tuesday, the lowest since mid-March.          
    In other precious metals, silver        gained 0.6 percent
to $16.57 an ounce.
    Platinum        slipped 0.21 percent to $898.5 an ounce and
palladium        ceded 0.3 percent to $990.5 per ounce.

 (Additional reporting by Karen Rodrigues in Bengaluru
Editing by Edmund Blair and Louise Heavens)
  
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