Gold rises on failed Brexit vote, Fed rate hike pause hopes

By Sethuraman N R

BENGALURU (Reuters) - Gold edged up on Wednesday, supported by uncertainty around Brexit after lawmakers voted down British Prime Minister Theresa May's deal to leave the European Union, while calls grew for a pause in U.S. rate hikes.

Spot gold was up 0.3 percent $1,292.61 per ounce at 0610 GMT. U.S. gold futures were up 0.3 percent at $1,292.40 per ounce.

An increased chance of a disorderly Brexit is supporting gold's safe-haven appeal, even as U.S. share markets have risen in recent weeks, said Benjamin Lu, analyst with Phillip Futures.

"Gold is holding pretty well despite competing influence from U.S. equity markets."

British lawmakers defeated May's Brexit divorce deal by a crushing margin, triggering political chaos that could lead to a messy exit from the EU or even to a reversal of the 2016 decision to leave.

Investors' are now watching a confidence vote on May's government by lawmakers later in the day.

"We are seeing weakness in economy in China as well as the U.S. and markets are expecting that Fed might slow interest rates in the near future," Lu said.

In separate appearances on Tuesday, various Fed policymakers agreed the central bank should pause further rate hikes until it is clear how much the U.S. economy will be held back by larger risks like slowing growth in China and narrower ones like the ongoing budget stalemate in Washington.

Gold tends to gain on expectations of lower interest rates, as they reduce the opportunity cost of holding non-yielding bullion. Lower interest rates also tend to weigh on U.S. yields and the dollar, in which gold is priced.

The U.S. economy is taking a larger-than-expected hit from a partial government shutdown, White House estimates showed on Tuesday, with the longest such shutdown in U.S. history dragged into its 26th day.

"The data points from the U.S. have not been so encouraging and markets have got one more tension after the rejection of Brexit voting," said Ajay Kedia, director at Kedia Commodities in Mumbai

"Gold will find support in the coming sessions. But prices need to break above the key $1,300 level before making a more meaningful move."

Spot gold has gained more than 11 percent since hitting a 1-1/2-year low in mid-August at $1,159.96, mostly due to tumultuous stock markets and a weakness in the U.S. dollar. But, prices have been stuck in a $20 range for the past couple of weeks.

Spot gold remains neutral in a range of $1,285-$1,299 per ounce, and an escape could suggest a direction, according to Reuters technical analyst Wang Tao.

Among other precious metals, palladium rose 0.5 percent to $1,324 an ounce. It hit a record high at $1,342.43 last week.

Platinum rose 0.3 percent to $795.50, while silver was steady at $15.57 an ounce.

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Rashmi Aich and Richard Pullin)