Gold falls as new trade tariffs, rate hike views buoy dollar

By Zandi Shabalala

LONDON (Reuters) - Gold prices faltered on Thursday, under pressure from a stronger dollar as the U.S. Federal Reserve reaffirmed intentions to raise interest rates and trade tariffs between the United States and China kicked in.

The precious metal failed to confirm its brief break through $1,200 on Wednesday, a key psychological level, as the dollar resumed its ascent.

Spot gold was down 0.3 percent at $1,190.27 an ounce at 1225 GMT. Prices hit their highest since Aug. 13 at $1,201.51 in the previous session.

Minutes of the Fed's latest policy meeting suggested the central bank is on course to further raise interest rates after two hikes this year, denting demand for non-interest yielding gold.

"Gold has fallen victim to another round of dollar strength," said Saxo Bank analyst Ole Hansen.

"The market needs to see that the trajectory of U.S. rate hikes is beginning to slow and that was not the signal in Fed minutes yesterday."

The number of Americans filing for unemployment benefits fell last week, which could bolster the Fed's appetite for further interest rate increases, data showed on Thursday.

Meanwhile, trade tariffs imposed by the United States and China on each other kicked in on Thursday, benefiting the safe-haven U.S. currency, even as mid-level officials from both sides resumed talks in Washington.

Amid shocks to the global financial system caused by the ongoing trade war, investors have opted for the safety of U.S. Treasuries and the U.S. currency, making dollar-denominated gold more expensive for holders of other currencies.

This, along with higher U.S. interest rates this year, has sapped demand for the precious metal.

U.S. gold futures were down 0.5 percent at $1,197.40

The dollar was up 0.2 percent against a basket of six major currencies. [FRX/]

Markets are now keeping a close eye on the Fed's economic symposium in Jackson Hole, Wyoming, starting on Friday for any change in its stance, especially after U.S. President Donald Trump's attack on its monetary policy this week.

Signalling further negative sentiment in gold was a record of net shorts in COMEX gold contracts.

However, gold should be supported by physical buying due to seasonal factors and robust core demand from the world's largest consumers China and India, a note from UBS said.

Spot silver was down 0.8 percent to $14.61, having touched a one-week low of $14.49 an ounce.

Platinum fell 1 percent to $783.90 an ounce, while palladium snapped a five-session winning streak, slipping 1.1 percent to $917. Palladium hit a three-week high at $928.50 on Wednesday.

(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Mark Potter)