June 20, 2017 / 10:30 AM / a year ago

PRECIOUS-Gold hits hitting 5-week low on dollar rally

    * Dollar rallies on Fed rate hike bets
    * Silver hits lowest since May 12

 (Updates prices)
    By Maytaal Angel
    LONDON, June 20 (Reuters) - Gold hit a five-week low on
Tuesday as the dollar rallied  following hawkish comments from
an influential U.S. Federal Reserve official and dovish remarks
from the Bank of England governor.
    New York Fed President William Dudley said on Monday that
labour market tightness should help drive up inflation,
reinforcing the message that recent weak data is unlikely to
derail plans to keep raising interest rates.             
    The greenback had a further lift on Tuesday following dovish
comments from Bank of England Governor Mark Carney. Also on
Tuesday, Boston Fed President Eric Rosengren said that the era
of low interest rates in the U.S. and elsewhere poses financial
stability risks and that central bankers must factor such
concerns into their decision-making.                   
    "It (another U.S. rate hike) is not entirely unlikely. Gold
from now to the end of the year could see slight drops,
especially if (on top of Fed hikes) the European Central Bank
starts tapering its bond buying programme," said Natixis analyst
Bernard Dahdah.
    Spot gold        traded flat at $1,242.40 per ounce by 1511
GMT, after earlier touching a low of $1,241 an ounce, the
weakest since May 17.
    U.S. gold futures         fell 0.2 percent to $1,243.80.
    Investors are pricing in around a 50 percent chance that
rates will be raised again by the year-end, according to CME
FedWatch. A strong dollar makes dollar-priced gold costlier for
non-U.S. investors.  
    "The market attributes considerable weight to Dudley's
words, as he represents the majority opinion of the Federal Open
Markets Committee," said Commerzbank in a note.
    In the wider markets, a 2.5 percent drop in oil prices to
their lowest in seven months dragged global equities off
all-time highs, limiting losses in gold which is seen as an
alternative investment to volatile stocks.
    "Mixed U.S dollar trade provided some respite for gold
during Asian trade on Tuesday, however, not to the extent we
expected we would see," MKS PAMP trader Sam Laughlin said in a
    "The next key level of support sits around $1,240, with a
broad extension to the 200 day moving average around $1,237."
    Among other metals, spot palladium        traded up 0.4 at
$865.50 per ounce, and platinum        slipped 0.5 percent to
    Silver        fell 0.3 percent to $16.41, having earlier
touched $16.37, its weakest since May 12. 

 (Additional reporting by Nithin ThomasPrasad, editing by David
Evans and Pritha Sarkar)
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