Gold dragged down by U.S. Fed rate hike views

By Zandi Shabalala

LONDON (Reuters) - Gold fell on Friday, snapping a week-long streak of gains in tight trade as hawkish comments from U.S. Federal Reserve officials renewed bets on a U.S. rate hike this year while contradicting comments from others curbed losses.

Spot gold was down 0.65 percent at $1,343.40 per ounce at 1155 GMT while U.S. gold dropped 0.68 percent to $1,347.80 an ounce.

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

The week has seen a run of mixed signals from Federal Reserve policymakers.

San Francisco Fed President John Williams on Thursday joined a growing chorus of his colleagues signalling support for a U.S. interest rate hike in coming months.

New York Fed President William Dudley reinforced his confidence in a possible rate hike for a second time in the week.

Dallas Fed President Robert Kaplan, however, saw limited room to manoeuvre on rates.

Meanwhile, European Central Bank rate setters agreed not to discuss any policy change at their July meeting and to keep market hopes for more stimulus in check, minutes showed on Thursday.

Signals are neutral for spot gold as it is stuck in a range of $1,337.22-$1,358.01 per ounce, Reuters technical analyst Wang Tao said.

Analysts saw gold rising after trading tightly as global central banks were still printing money and the Fed provided mixed signals on interest rate hikes.

"The main story is that the range is getting tighter and tighter. The big question is which way it will break and we think it's going to break on the upside," Jesper Dannesboe, senior commodity strategist at Societe Generale, citing the low rate environment in the United States and quantitative easing in the UK and Eurozone.

Reports showed the number of Americans filing for unemployment benefits fell more than expected last week, while manufacturing activity in the U.S. Mid-Atlantic region saw a mild improvement this month.

Members of the Fed's rate-setting Federal Open Market Committee were generally upbeat about the U.S. economy and labour market, but several said any slowdown in future hiring would augur against a near-term rate hike.

"Still rangebound, gold looks to break through USD $1,360 as the possibility of a September rate rise tempers," MKS PAMP Group said in a note.

Holdings of SPDR Gold Trust, the world's largest gold-backed ETF, fell for a second day.

The dollar against a basket of six major currencies was up about 0.31 percent at 94.447.

Spot silver was down 2.19 percent at $19.30 an ounce, while platinum inched lower at $1,111.24.

Palladium was down 1.04 percent at $705.47, after hitting an one-week high of $717.70 on Thursday.

(Additional reporting By Nallur Sethuraman in Bengaluru; editing by Gopakumar Warrier and Jason Neely)