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PRECIOUS-Gold steadies after rate hike sell-off

1 kg. gold bars are seen on a production line in Ahlatci Metal Refinery in the central Anatolian city of Corum, Turkey, May 11, 2017.

1 kg. gold bars are seen on a production line in Ahlatci Metal Refinery in the central Anatolian city of Corum, Turkey, May 11, 2017.

REUTERS/Umit Bektas


By Marcy Nicholson and Peter Hobson

NEW YORK/LONDON, June 16 (Reuters) - Gold was little changed on Friday as investors judged that a sell-off sparked by a rise in U.S. interest rates this week had run its course and the dollar weakened, making bullion cheaper for holders of other currencies.

Spot gold was up 0.1 percent at $1,254.24 an ounce by 2:19 p.m. EDT (1819 GMT), having earlier hit $1,251.05, its lowest since May 24.

U.S. gold futures settled up 0.2 percent at $1,256.50.

Gold was on track for a second weekly loss and has fallen more than 3 percent from a high of $1,295.97 on June 6 as investors braced for the U.S. Federal Reserve to raise interest rates and signal its policy outlook on Wednesday.

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Bullion is sensitive to higher interest rates because they push bond yields higher, increasing the opportunity cost of holding non-yielding gold, and tend to boost the dollar.

"Gold has been spooked by the hawkish tone from the Fed, which triggered some long liquidation both in futures and exchange-traded funds," said Saxo Bank analyst Ole Hansen.

Fears of more rate increases this year were heightened on Thursday by strong U.S. economic data, though housing numbers on Friday disappointed, pushing bond yields and the dollar lower.

"If the Fed were to follow a more aggressive approach, this could preclude any significant rise in gold prices for the rest of the year," Commerzbank analysts wrote in a note.

In other precious metals, silver was 0.2 percent down at $16.68 an ounce after tapping a four-week low at $16.62 and heading for a weekly decline of about 2.6 percent, its biggest in six weeks.

"Price action in both gold and silver of late seems to imply that traders still have plenty of short-term long positioning on their books," said OANDA analyst Jeffrey Halley.

Platinum gained 0.5 percent to $924.50 an ounce, having touched its lowest in more than a month on Thursday at $913.50.

"Latest jewelry import data from China suggests an improvement on a weak 2016. This is important as Chinese jewelry demand accounts for about 20 percent of total platinum use," said Giovanni Staunovo, analyst for UBS Chief Investment Office.

South African mine supply, however, rose in the first quarter of 2017 and Staunovo said UBS trimmed its 6- and 12-month platinum price upside forecast to $1,000 an ounce from $1,050 an ounce previously.

Palladium was down 0.3 percent at $867.20 and on track for its first weekly decline in four weeks.

(Additional reporting by Nithin ThomasPrasad and Vijaykumar Vedala in Bengaluru; Editing by Marguerita Choy and David Goodman) ((Marcy.Nicholson@thomsonreuters.com, +1 646 223 6043; Reuters Messaging Marcy.Nicholson.ThomsonReuters.com@reuters.net))



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