Gold slips as Fed rate hike prospects boost dollar

By Sethuraman N R

REUTERS - Gold eased on Friday as the dollar stayed firm on expectations of a rate hike by the U.S. Federal Reserve this year, but the metal was on track to end a volatile week slightly higher.

Spot gold slipped to $1,337.16 an ounce by 0454 GMT. It ended 0.6 percent down at $1,338.39 on Thursday.

U.S. gold was down 0.5 percent at $1,342.80 an ounce.

"The market is waiting for more cues on a U.S. rate hike. There is a big mix of data with some being supportive and some being not," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Spot gold may bounce moderately in a narrow range of $1,344-$1,349 per ounce, before retesting support at $1,335, as suggested by its wave pattern and a Fibonacci projection analysis, Reuters technical analyst Wang Tao said.

"For the moment it looks like gold is being squeezed into a 1330-1360 consolidation form with a slight short-term negative bias," trading firm MKS Pamp said in a note.

The U.S. Fed is likely to raise interest rates in December, after the Nov. 8 presidential election, according to a Reuters poll.

The firm dollar was supported by comments from San Francisco Fed President John Williams that suggested a U.S. interest rate increase this year is still a real possibility as inflation pressures grow.

A stronger dollar discourages gold buying by making it more expensive in other currencies.

The U.S. dollar was at 95.921 against a basket of currencies, while Asian stocks rose slightly in early Friday trade, taking a cue from Wall Street's records overnight.

"Gold should hold steady above $1,300. There could be a knee-jerk reaction on a rate hike. But, overall global economic situation is still favouring the metal," a China based trader said.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.03 percent to 972.32 tonnes on Thursday.

Platinum was up 0.4 percent at $1,141.45 an ounce, after falling 3 percent in the previous session. Palladium remained stable at $688.97, after tumbling 5 percent on Thursday.

"A further move lower in the platinum group metals could trigger a move below $1,330 for gold in the next few days," MKS Pamp said.

Spot silver edged 0.3 percent down at $19.88 an ounce.

(Reporting By Nallur Sethuraman in Bengaluru; Editing by Richard Pullin and Muralikumar Anantharaman)