Gold set for second monthly loss as expected US rate hike drags

By Manolo Serapio Jr

SINGAPORE (Reuters) - Gold edged lower on Tuesday and was heading for a second straight monthly fall, pressured by expectations the U.S. Federal Reserve will increase interest rates this year.

Bullion has fallen 3 percent since hitting a three-week high above $1,200 an ounce last week, as the dollar gained after Federal Reserve Chair Janet Yellen on Friday signalled a rate hike could be likely later this year.

Citing sustained gains in the U.S. economy, Yellen's remarks halted gold's longest rally since 2012, that had been spurred by hopes the Fed would take it slow in raising rates.

"Gold's inability to hold over the psychological $1,200 level, which it recently cleared, suggests that bullion may be susceptible to a further consolidation of gains," said HSBC analyst James Steel.

"Bullion may weaken further in the near term, we believe."

Spot gold was down 0.3 percent at $1,181.80 an ounce by 0629 GMT, after touching a one-week low of $1,179.55.

Bullion has lost 2.5 percent so far in March, and is on track for a third quarterly drop.

U.S. gold for April delivery edged down 0.3 percent to $1,181.30 an ounce.

Investors are looking to U.S. jobs data on Friday, with a robust report likely to lift expectations that policymakers could raise U.S. interest rates sooner than later.

Economists polled by Reuters forecast a 245,000-gain in U.S. jobs in March. U.S. jobs increased by 295,000 in February, marking the 12th straight month that employment gains have been above 200,000 - the longest such run since 1994.

But outside the labour market, there were still signs that the U.S. economy hit a soft patch in the first quarter. Consumer spending barely rose in February as households used the windfall from lower gasoline prices to boost savings to the highest level in more than two years.

In other precious metals, spot palladium climbed almost 1 percent to $731.95 an ounce, after dropping to $721.98 on Monday, its weakest since February last year.

(Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)