Gold little changed, awaiting direction on U.S. rates

finance.yahoo.com

By Devika Krishna Kumar and Zandi Shabalala

NEW YORK/LONDON (Reuters) - Gold was little changed on Thursday, pressured by a persistently strong dollar as the market awaits more signs about the timing of an expected U.S. interest rate rise from the Federal Reserve.

Bets that the Fed will raise rates have driven the dollar to nine-month highs against a basket of currencies (.DXY) this week and limited gains in gold. The dollar index was about 0.3 percent higher on Thursday.

Spot gold (XAU=) was up 0.3 percent at $1,270 an ounce by 3:11 p.m. EDT (1911 GMT), while U.S. gold futures (GCcv1) ended the session up 0.2 percent at $1,269.50 per ounce. Spot gold has traded in a $16 range over the last week.

"The constant strength in the U.S. dollar serves as an inhibiting factor to the upside. We were higher, volume was moderate with little real enthusiasm to speak of," said Bill O'Neill, co-founder of LOGIC Advisors.

"I think short term, the interest rate concerns are there ... but long term I still think the market is going to go higher."

Gold is an alternative investment during times of political and financial uncertainty such as the U.S. presidential election in November, while higher interest rates lift the opportunity cost of holding non-yielding assets and boost the dollar, in which gold is priced.

Higher physical demand in India, the world's second-biggest consumer of gold, is helping prices and preventing a selloff ahead of an expected Fed interest rate increase in December, analysts say.

Festivals in India, such as Diwali and Dhanteras, when gold is traditionally given as gifts, are approaching, which is typically followed by increased demand because of the wedding season.

"Physical demand from Asia continues to underpin the market at present, with gold continuing to consolidate for the time being between $1,250-75," MKS PAMP Group trader Sam Laughlin said.

According to estimates from Macquarie, Chinese gold imports in September rose 58 percent to $6 billion, or 118 tonnes, from August but are down 25 percent from a year ago.

Strong physical demand for gold is being also countered by continuing selling by gold exchange-traded funds.

SPDR Gold Trust (GLD), the world's largest gold-backed ETF, said its holdings fell 1.49 percent to 942.59 tonnes on Wednesday.

Silver (XAG=) was up 0.1 percent at $17.60 an ounce, while platinum (XPT=) was up 0.2 percent at $963.75. Platinum rose to more than a two-week high of $970.80 on Wednesday.

Palladium (XPD=) fell 1.5 percent to $611.95 per ounce.

(Additional reporting by Apeksha Nair and Nallur Sethuraman in Bengaluru; Editing by Alexander Smith and Steve Orlofsky)