Gold holds steady, but upbeat economic outlook a threat

By Maytaal Angel

LONDON (Reuters) - Gold prices were little changed on Tuesday as the dollar steadied near a six month high, but upside in the precious metal was firmly capped by bullish global economic fundamentals.

Investors are awaiting economic data that might confirm the U.S. economy is on track for a strong quarter, with rising bond yields also supporting the greenback and making dollar priced gold costlier for non-U.S. investors.

Spot gold edged up 0.1 percent at $1,293.04

per ounce at 1224 GMT, although it is down 0.5 percent so far this month, having fallen 1.3 percent in May.

U.S. gold futures for August delivery were flat at $1,297 per ounce.

"Prices have been dropping since May in anticipation of a Fed rate hike. There's still some strengthening of the dollar to come. Geopolitics is on the backburner," said Bernard Dahdah, precious metals analyst at Natixis.

Stronger-than-expected U.S. jobs data released on Friday fuelled expectations that the Federal Reserve would raise interest rates at its policy meeting starting on June 12.

Higher interest rates tend to boost the dollar and reduce investor interest in non-yielding bullion.

A strong reading on ISM non-manufacturing PMI for May later this session will seal the case for another Fed rate hike, following up on a rate hike in March and might even prompt the central bank to strike a hawkish stance.

"There is lack of interest in gold. It is more interesting for equities and people are making profit there, so nobody wants to trade in gold for the time being," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Global stocks hit a record high on Tuesday, spurred on by a new all-time peak for Apple, a 17-year top for European tech firms and news that Twitter and Netflix were set to join Wall Street's flagship S&P 500 index.

Rising equity markets tend to signal strong investor risk appetite, weighing on gold, seen as a safe haven asset.

Spot gold is still targeting the May 21 low of $1,281.76 per ounce, as its bounce from this level has completed, according to Reuters technical analyst Wang Tao.

In other precious markets, silver rose 0.3 percent to $16.42 an ounce.

Platinum fell 0.7 percent to $894.20 an ounce. It earlier hit a low of $888, the lowest since May 21.

Palladium was 0.6 percent lower at $988.80 per ounce after hitting a six-week high of $1,010.50 the previous session.

(Additional reporting by Karen Rodrigues and Swati Verma in Bengaluru; Editing by Alexandra Hudson and Alexander Smith)