Gold heads for first monthly loss in 2017 as rally stalls in second quarter

By Marcy Nicholson and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold eased on Friday to stay on track for its first monthly loss this year, as hints from leading central banks that the era of easy money may be coming to a close pushed bond yields higher, hurting the non-interest bearing metal.

While it is still up nearly 8 percent in the first half, gold has stalled in the second quarter after a strong start to the year, and is little changed from where it ended in March.

Spot gold was down 0.3 percent at $1,241.41 an ounce by 2:34 p.m. EDT (1834 GMT), while U.S. gold futures for August delivery settled down 0.3 percent at $1,242.30.

The futures market will trade an abbreviated session on Tuesday for the U.S. Independence Day holiday.

Spot prices have fallen around 2 percent so far in June, and are on track to fall 0.6 percent in the second quarter.

Comments from the euro zone, British and Canadian central banks this week indicated that quantitative easing programs in place since the financial crisis may be being wound up, leading to a gradual normalization of interest rates.

"The knee jerk reaction was that even as risk appetite got smoked by lower equity prices, gold didn't do great either and that is almost a direct reaction to higher yields essentially," said Bart Melek, head of commodity strategy for TD Securities in Toronto.

While the European Central Bank remains cautious on tightening monetary policy, the trend is turning more towards the hawkish side, said LBBW analyst Thorsten Proettel.

"The most important thing for the gold market is that we have monetary policy tightening in the United States, and so with a further interest rate hike the gold price has gone down."

Germany's benchmark bond yield recorded its biggest weekly jump since December 2015 as investors appeared to position for an end to the era of ultra-easy monetary policy. [GVD/EUR]

U.S. Treasury yields rose for a fourth straight day as inflation data was not seen as weak enough to delay the Federal Reserve's expected path on interest rate hikes. [US/]

Among other precious metals, silver was up 0.3 percent at $16.63 an ounce. Silver has seen the biggest fall among major precious metals this quarter, down nearly 9 percent, while palladium is the best performer, up 6.1 percent.

Palladium was down 0.5 percent at $842.93 an ounce on Friday, while platinum was down 0.05 percent at $919.50.

(Additional reporting by Vijaykumar Vedala and Nithin Prasad in Bengaluru; Editing by Mark Potter and Richard Chang)