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Thu 9 Apr 2015 12:04 PM

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Gold falls on renewed bets for US rate rise in June

Bullion pulled further away from a seven-week high reached on Monday

Gold falls on renewed bets for US rate rise in June
(Getty Images)

Gold retreated
for the third session in a row on Thursday after comments from Federal Reserve
officials and minutes of the US central bank's meeting last month suggested
that a rate increase in June remained on the cards despite recent weak data.

Bullion pulled
further away from a seven-week high reached on Monday that was spurred by hopes
the Fed would delay a rate rise after last week's disappointing US jobs data.

A US interest
rate increase, which would be the first in nearly a decade, dims the appeal of
non-interest-yielding assets such as gold.

near-term outlook for gold looks weak, with the path of least resistance
lower," said HSBC analyst James Steel.

Spot gold was
off 0.4 percent at $1,197.71 an ounce at 0341 GMT after hitting a session low
of $1,195.70. Bullion touched $1,224.10 on Monday, its highest since February

New York Fed
President William Dudley and Fed Governor Jerome Powell on Wednesday sketched
out scenarios in which the central bank could make an initial move earlier than
many now expect and then proceed in a slow and gradual manner on further rate

The minutes of
the Fed's March 17-18 meeting, also released on Wednesday, showed that it
concluded with the Fed opening the door to a June rate rise, and that
"several participants" went on record as saying they expected
upcoming economic data would warrant an initial rate increase that month.

The dollar
traded at one-week highs against a basket of major currencies as investors
renewed bets on a June increase.

US gold for
June delivery dropped 0.4 percent to $1,197.90 an ounce.

But Phillip
Futures analyst Howie Lee said gold's decline could be temporary, arguing there
was "little chance" the Fed would raise rates at this time,
"given how fragile the economy is".

"What this
means is that the current decline in gold prices could just be a technical
correction; while it may fall to $1,190 today, I would highly expect it to
return above $1,200 in the coming weeks," he said.

Gold demand
from No. 2 consumer China remained weak with physical gold at the Shanghai Gold
Exchange flipping to a small discount from a premium over the global spot

While demand
from top gold consumer India appeared stronger, HSBC's Steel said that,
overall, "physical buying may not be sufficiently powerful to push prices
higher near-term."

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