Gold declines on firmer dollar amid U.S. rate hike views

By Nithin ThomasPrasad

(Reuters) - Gold prices dropped on Thursday for a third consecutive day, holding near four-week lows hit in the previous session, on a firmer greenback amid expectations of more U.S. interest rate hikes this year.

Spot gold was down 0.4 percent to $1,313.51 per ounce, as of 0351 GMT. In the previous session, it hit its lowest since Jan. 10 at $1,311.66.

U.S. gold futures for April delivery rose 0.1 percent to $1,315.70 per ounce.

The U.S. dollar rose on Wednesday, marking its biggest one-day gain in more than three months against a basket of currencies. It was steady at 90.216 on Thursday.

"The main drivers behind the precious metal - notably, the dollar and U.S. equities - still remain too turbulent," INTL FCStone analyst Edward Meir said.

"They should have an oversized impact on price direction for gold for a little while longer."

Asian shares flirted with six-week lows on Thursday, while U.S. stocks finished lower on Wednesday, losing ground late in the session as a jump in Treasury yields kept investor nervousness high.

The U.S. Federal Reserve will stick to its plan for "steady, gradual" interest-rate increases, San Francisco Federal Reserve Bank President John Williams said on Wednesday despite market gyrations and strong data on U.S. wage growth that has bond traders pricing in faster rising inflation.

Hikes in interest rates lead to higher bond yields and dampen the demand for non-yielding gold. The yellow metal is also used as a hedge against inflation.

"The shifting Fed narrative that is gathering hawkish following could be the most significant thorn in the Gold Bulls side," said Stephen Innes, head of trading APAC at OANDA.

Spot gold is expected to fall more to $1,301 as it has pierced below a support at $1,316 per ounce, according to Reuters technical analyst Wang Tao.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped 0.29 percent to 826.90 tonnes on Wednesday from 829.27 tonnes on Tuesday.

Holdings fell for a second straight session after they marked on Tuesday their worst one-day drop since December 2016.

"The heavy falls in equities appear to have impacted ETF investors," ANZ analysts said in a note.

Among other precious metals, silver edged 0.4 percent lower to $16.31 per ounce. In the previous session, it touched $16.26, its lowest since Dec. 22.

Platinum declined 0.8 percent to $972.00 per ounce, after touching its lowest since Jan. 11 on Wednesday.

Palladium fell 0.4 percent to $980.20 per ounce. In the previous session, it hit $978.55 an ounce, its lowest since Nov. 15.

(Reporting by Nithin Prasad and Nallur Sethuraman in Bengaluru, Editing by Richard Pullin and Sherry Jacob-Phillips)