Gold little changed as Fed rate expectations offset geopolitical risk

By Devika Krishna Kumar and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold prices ended little changed on Monday as expectations that the Federal Reserve will press ahead with interest rate rises offset concerns over political tensions in North Korea and the Middle East.

Late in the session, prices were supported after Fed Chair Janet Yellen struck a cautious note, saying it would be appropriate to gradually raise rates if the economy continued to perform strongly.

Spot gold was up 0.04 percent at $1,254.06 an ounce by 4:32 p.m. EDT (2032 GMT), while U.S. gold futures for June delivery settled 0.3 percent lower at $1,253.90.

On Friday, the metal rose above $1,270 on Friday for the first time since early November following much weaker than expected U.S. jobs data, and after the United States launched a missile strike on a Syrian air base.

Top aides to U.S. President Donald Trump differed on Sunday on where U.S. policy on Syria was headed after last week's attack on a Syrian air base, while U.S. Secretary of State Rex Tillerson warned that the strikes were a warning to other nations, including North Korea.

"Given light market positioning there is scope for safe-haven flows; however, complacency suggests prices are more likely to range-trade in the near term," Standard Chartered said in a note.

"Gold is caught between rising tensions that could stoke safe-haven flows, and the market looking through the geopolitical risks to the next U.S. rate hike given the tight correlations."

After rallying for a fourth month though gold is trading just above its 200 day moving average.

"There appears to have been some profit taking after that move above the 200-day moving average on Friday," Mitsubishi analyst Jonathan Butler said.

"Friday's U.S. unemployment reading, which fell to a 10-year low, would appear to confirm that the United States is approaching full employment," he said. "This has increased the probability of a June rate rise... (and) clearly weighed on gold."

The U.S. dollar fell on Monday as Treasury Yields dipped after starting the week near three-week highs against major currencies in the wake of a Federal Reserve official reinforcing the U.S. central bank's commitment to continue raising interest rates.

By the afternoon in New York, U.S. Treasury yields pared an earlier drop, prompted by soft demand at a $24 billion auction of three-year notes , the first part of this week's $56 billion coupon-bearing government debt supply.

Expectations that the pace of U.S. interest rate increases will pick up this year, lifting the opportunity cost of holding non-yielding bullion, have proved a major drag on gold.

The euro also came under pressure from worries over the tightening race for the French presidency.

The wider financial markets took on a more cautious tone on Monday, with trading volumes muted by political tensions in the Middle East and the Korean peninsula.

In other precious markets, silver prices slipped after the LBMA silver price benchmark auction was paused for 17 minutes after a circuit breaker was triggered when the auction price moved outside of the spot range, the CME said.

Silver was down 0.2 percent at $17.93 an ounce, having hit its highest since Feb. 27 at $18.47 on Friday. Platinum was 1.2 percent lower at $939.9, while palladium was down 1.6 percent at $788.20.

(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by David Goodman and Susan Thomas)