PRECIOUS-Gold eases as equities recover, still set for weekly gain

Published 2016-04-08, 02:49 p/m
© Reuters.  PRECIOUS-Gold eases as equities recover, still set for weekly gain
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* Gold eases after 1.5 pct gain on Thursday
* Prices still set for 1.4 pct weekly gain
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC

(Updates prices; adds comment, second byline, NEW YORK
dateline)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, April 8 (Reuters) - Gold weakened on Friday
as strength in equities prompted investors to cash in some of
the previous day's gains, remaining on track for its biggest
weekly rise in five weeks as the Federal Reserve remained
cautious on U.S. interest rate increases.
Global stock markets rebounded but still were set to end a
bruising and volatile week lower, fed by growing uncertainty
surrounding the U.S. economic and policy outlook. MKTS/GLOB
Spot gold XAU= was down 0.1 percent at $1,239.70 an ounce
by 2:27 p.m. EDT (1827 GMT), while U.S. gold futures GCv1 for
June delivery settled up 0.5 percent at $1,243.80 an ounce.
Spot prices are up 1.4 percent this week, chiefly because of
Thursday's 1.5 percent rally.
The metal has been hemmed into a narrow range by uncertainty
about the path the U.S. central bank will take to raising
interest rates.
"Gold prices rallied because the market anticipated a change
in the Fed's rate hike outlook," said Stefan Wieler, vice
president of GoldMoney in Vancouver. "Now the Fed says two
hikes, the market thinks zero, and gold prices hover somewhere
around $1,200-$1,250 until this question gets answered."
Fed Chair Janet Yellen, in a conversation with former Fed
chairmen on Thursday, said the U.S. economy is still on track to
warrant further rate rises. But U.S. interest rate futures still
indicate a less than 20 percent chance of a rate increase in
June 0#FF: .
Higher rates would weigh on gold by lifting the opportunity
cost of holding non-yielding bullion. Waning expectations for
further rate increases this year helped gold to its best quarter
in nearly 30 years in the three months to March.
"Janet Yellen said (the Fed) will be moderate in making
hikes in the future, so the markets no longer anticipate the
four interest rate hikes they did at the end of 2015," LBBW
analyst Thorsten Proettel said.
Proettel said he remains bearish on prices, saying that
positioning on the futures markets looks overstretched, while
inflows into gold-backed exchange-traded products are drying up.
Data from the world's largest gold-backed exchange-traded
fund - New York-listed SPDR Gold Shares GLD - showed its
holdings are little changed this week after posting the year's
first weekly outflow last week.
Demand for physical gold from Asia also has been muted of
late, analysts said.
In other precious metals, silver XAG= was up 0.8 percent
at $15.34 an ounce, platinum XPT= gained 1.3 percent to
$964.60 and palladium XPD= rose 0.4 percent to $535.20.

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GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC
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