June 1, 2017
PRECIOUS-Gold holds near five-week highs, but potential U.S. rate hike weighs
(Reuters) - Gold held steady on Thursday, after hitting a five-week high in the previous session, supported by geopolitical tensions and a weaker dollar, but expectations the U.S. Federal Reserve will hike interest rates this month weighed on prices.
Spot gold was down 0.03 percent at $1,268.46 per ounce at 0407 GMT. On Wednesday, it touched a session high of $1,273.74 an ounce, its strongest since April 25.
U.S. gold futures fell 0.3 percent to $1,268 an ounce.
"We are seeing some safe haven demand for gold ahead of elections in the UK next week and Friday's U.S. non-farm payroll data," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
Prime Minister Theresa May could lose control of parliament in Britain's June 8 election, according to a projection by polling company YouGov, raising the prospect of political turmoil just as formal talks for the country to leave the European Union begin.
Positive payroll data from the United States could mean the Fed will raise rates as expected at its June 13-14 meeting. Traders believe there is an 87 percent chance of a rate rise, according to CME Group's FedWatch tool.
The higher rates would lower investor demand for non-interest bearing gold.
San Francisco Federal Reserve Bank President John C. Williams said on Wednesday that three rate increases are most likely this year. However, some recent soft U.S. economic data has raised questions whether the Fed will stay with that plan.
Spot gold may retrace to $1,257 per ounce, as it failed to break a resistance at $1,272, according to Reuters technical analyst Wang Tao.
President Donald Trump's decision on Thursday on whether the United States will continue to be part of the global pact to fight climate change will also be keenly watched, analysts said.
"A withdrawal in itself shouldn't be bearish for the U.S. dollar in isolation; rather it is the intent that it signals," said Jeffrey Halley, a senior market analyst at OANDA.
"In this case a more isolationist stance from literally, the rest of the world's view. This could see that geopolitical temperature gauge rise again, taking gold with it."
In the wider markets, the dollar languished near a recent 6-1/2 month low against a basket of major currencies on Thursday.
Among other precious metals, silver fell 0.03 percent to $17.28 an ounce.
Platinum was almost unchanged at $943.19 an ounce.
Palladium, which hit a four-week high at $821.90 an ounce on Wednesday, was last seen down 0.1 percent at $816.25.