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Gold Slips On Hawkish US Fed Rate Views

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced

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Gold eased on Wednesday following hawkish comments from U.S. Federal Reserve officials that raised the prospects of a rate increase this year, and more clues on rates are expected later from the release of minutes from the last Fed policy meeting.

New York Fed President William Dudley said a rate hike in September was possible, while Atlanta Fed President Dennis Lockhart said the U.S. economy was likely strong enough for at least one rate increase before the end of 2016, with two a possibility.

Spot gold was down 0.25 percent at $1,342.68 an ounce by 1012 GMT. The precious metal rose 0.5 percent on Tuesday.

U.S. gold fell 0.69 percent to $1,347.70 an ounce.

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

"What you are seeing is volatility on speculation about when the U.S. Fed will raise rates and that has been the main driver (of gold prices)," Simona Gambarini, an analyst at Capital Economics said.

"We have to wait for the minutes of the meeting to have a better ideas of when they will proceed with the rate hike."

Macro economic data from the world's largest economy has been mixed so far and markets will be looking for some direction from comments expected from St. Louis Fed President James Bullard as well as the release of the Fed's July policy meeting minutes later in the session.

The dollar edged away from 7-week lows against the yen and euro on Wednesday. The dollar index was up 0.2 percent at 94.989 after losing 0.8 percent on Tuesday.

A stronger dollar discourages gold buying by making the metal more expensive for holders of other currencies.

Spot gold looks neutral in a range of $1,333.50-$1,358.01 per ounce, and an escape could suggest a direction, according to Reuters technical analyst Wang Tao.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.19 percent to 962.23 tonnes on Tuesday.

Silver fell 1.04 percent to $19.59 an ounce on Wednesday.

Platinum was down 0.14 percent at $1,110, while palladium fell 0.43 percent to $697.

(Reuters)


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