June 2, 2017 / 10:42 AM / a year ago

PRECIOUS-Gold falls ahead of U.S. jobs data

    * Investors also looking to US non-farm payroll data at 1230
    * Gold, silver, platinum heading for first weekly decline in
    * Palladium at highest since July 2014

 (Updates throughout, adds LONDON dateline)
    By Zandi Shabalala
    LONDON, June 2 (Reuters) - Gold prices fell to their lowest
level in a week on Friday ahead of U.S. non-farm payrolls data
due later in the day that is expected to reinforce expectations
of an interest rate rise this month.
    A strong reading of jobs data bolsters the likelihood of two
interest increases that are expected by the market this year
which would dent the appeal of non-interest yielding gold.    
    Spot gold        had dropped 0.2 percent to $1,262.55 an
ounce by 1030 GMT. It earlier touched its weakest since May 26
at $1,258.60. The yellow metal is on track for its first weekly
decline in four.
    U.S. gold futures         fell 0.4 percent to $1,265.30 an
    "At this stage the market is fully pricing in an interest
rate hike but the question is will it be a dovish hike," said
Ole Hansen, head of commodity strategy at Saxo Bank.
    "These recently established long positions in gold are being
reduced ahead of the jobs data and the potential signal that
will send towards the June FOMC meeting."
    Non-farm payrolls probably increased by 185,000 jobs last
month, according to a Reuters survey of economists, after
surging by 211,000 in April.
    Federal funds futures implied traders saw a 96 percent
chance of the U.S. central bank increasing key overnight
borrowing costs by a quarter-point to 1.00-1.25 percent at its
June 13-14 policy meeting, CME Group's FedWatch program showed.
    U.S. factory activity ticked up in May after slowing for two
straight months and private employers stepped up hiring,
suggesting the economy is regaining speed and making interest
more likely.             
    "We are bearish on gold short-term into the Fed hike. There
is good room to fall back to $1,200 within the next three
months," said Dominic Schnider at UBS Wealth Management in Hong
    "The world economy is still in good shape, people are
risk-on, inflation is levelling off, there is no real big
inflation threat anymore, policy is normalising still."
    Hansen said the failure for gold to break through $1,272 an
ounce encouraged liquidation of some of the long positions which
flowed in last week.
    In the wider markets, global stocks hit a record high while
the dollar index        gained.                  
    Among other precious metals, palladium        touched its
highest level for nearly three years at $835.70 an ounce.
    Silver        was down 0.8 pct for the week and platinum
       2.9 percent. Both are heading for their first weekly
decline in four. 

 (Additional reporting by Vijaykumar Vedala in Bengaluru;
Editing by Greg Mahlich)
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