Gold slips to four-week low on Fed rate hike expectations

By Marcy Nicholson and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold hit the lowest level in more than four weeks on Tuesday as the dollar strengthened and expectations for a U.S. interest rate hike this month weighed, though moves were muted ahead of U.S. payroll data this week.

The precious metal has fallen in five out of the last six sessions as expectations for the Federal Reserve to push ahead with a U.S. rate increase this month ramped up.

Spot gold > was down 0.9 percent at $1,214.51 an ounce by 2:52 p.m. EST (1952 GMT), having touched its lowest since Feb. 3 at $1,213.65 an ounce. U.S. gold futures for April delivery settled down 0.8 percent at $1,216.10.

 

"The technical rejection at the 200-day moving average last week, combined with the rapid build up in spec longs that week, has left gold vulnerable," Saxo Bank's head of commodity strategy Ole Hansen said.

"There is no appetite for buying for gold ahead of a FOMC rate hike."

The metal slipped last week after comments from U.S. Federal Reserve Chair Janet Yellen that the Fed was poised to lift benchmark U.S. rates were seen as cementing plans for an increase at the Fed's March 14-15 meeting. [FED/DIARY]

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar in which it is priced.

Holdings of the world's largest gold ETF, New York-listed SPDR Gold Shares , fell another 3.8 tonnes on Monday, adding to the previous session's 4.7-tonne decline. [GOL/ETF]

"It's people getting out of it ahead of the Fed," said Bob Haberkorn, senior market strategist for RJO Futures in Chicago.

"Last week, Yellen pretty much laid it out; they're going to raise rates next week. The question is, how aggressive are they going to be and what's the language going to be."

The dollar and U.S. Treasury yields rose Tuesday after data showed the U.S. trade deficit grew in January to its widest monthly level in nearly five years. [FRX/]

Investors are now awaiting non-farm payrolls data for February on Friday, seen as an important barometer of the U.S. economy.

Silver > was down 1.9 percent at $17.44 an ounce, the lowest since Feb. 6.

"Silver ETFs saw outflows of a good 73 tons yesterday - their most pronounced daily outflow in nearly two months," Commerzbank said in a note.

Platinum > was down 1.5 percent at $960.30, after falling to $954, its lowest since Jan. 20. Palladium > was 0.2 percent higher at $772.

(Additional reporting by Arpan Varghese and Nallur Sethuraman in Bengaluru; editing by Louise Heavens and Grant McCool)