Gold flat as investors assess US data, Fed rate signals

Gold held steady in early Asian trading on Friday, supported by a relatively weaker dollar as investors digested a host of U.S. economic data and the Federal Reserve‘s “hawkish pause” on interest rate hikes.

FUNDAMENTALS

* Spot gold was flat at $1,959.03 per ounce by 0015 GMT. U.S. gold futures too were little changed at $1,971.50.

* Bullion fell to a three-month low on Thursday, but erased the losses to end higher after U.S. economic data offered some respite from a ‘hawkish pause’ on interest rates by the Federal Reserve.

* While U.S. jobless claims were higher than expected, a separate data showed industrial output dropped 0.2% in May, missing expectations for a 0.1% increase.

* The dollar index slid to a one-month low in the previous session, while 10-year Treasury yields slipped, supporting demand for zero-interest-bearing bullion.
* The Fed on Wednesday left its policy rate unchanged, but signalled in new projections that borrowing costs might still need to rise by as much as half a percentage point by year end. * The European Central Bank, too, left the door open to more rate hikes after it raised interest rates for the eighth successive time.

* Hawkish central banks have sent a resounding “no” to markets betting recession would force rate cuts soon, leaving money managers scrambling for direction as the second half of the year approaches.

* High interest rates dim appeal for zero-yield gold.

* The Bank of Japan is, however, widely expected to maintain ultra-easy monetary policy despite stronger-than-expected inflation, as it focuses on supporting a fragile economic recovery amid a sharp slowdown in global growth.

* Spot silver was up 0.2% to $23.8924 per ounce, platinum rose 0.2% to $987.47. But both were headed for a weekly loss.

* Palladium fell 0.3% to $1,396.08.