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Dollar strength, looming rate hikes pin gold near 9-month low

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Gold was pinned near a nine-month low on

Monday as bets for aggressive interest rate hikes by the U.S.

Federal Reserve and the dollar’s ascent dimmed appeal for

bullion.

Spot gold fell 0.3% to $1,735.91 per ounce by 2:00

p.m. ET (1800 GMT). U.S. gold futures settled down 0.6%

at $1,731.70.

Despite recession risks, lately investors have opted for

dollar over gold, pushing the currency to a near-two

decade peak, also eroding appeal for bullion among overseas

buyers.

Interest rate hikes, meanwhile, raise the opportunity cost

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of holding bullion since it pays no interest.

“Gold is under pressure as the dollar is making major runs

and there is expectations of a fairly large interest increase

after the (recent U.S.) federal report highlighted a strong

labor market,” Edward Moya, senior analyst with OANDA, said.

“Gold prices could tentatively breach below the $1,700 level

and then see strong support around $1,670.”

U.S. data on Friday showed labor market powered ahead with

strong job gains, giving the Fed ammunition to deliver another

75-basis-point rate hike this month.

Meanwhile, Fed’s Esther George, a dissenter at the central

bank’s 75 bps increase last month, said abrupt changes in rates

“could create strains” in economy.

But growing pessimism over the state of some economies in

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Asia, and geopolitical instability to some extent, are limiting

gold’s losses, as bullion remains the go-to safe haven during

times of trouble, said Ricardo Evangelista, senior analyst at

ActivTrades.

Spot silver fell 0.7% to $19.16 per ounce.

Despite the fall in silver prices, the retail cost of

American Silver Eagle coins stayed high at around $35/ounce, a

premium of about 80% on the spot price, which appears to be high

enough to impact demand, Heraeus Precious Metals wrote in a

note.

Platinum dropped 2.6% to $873.50 and palladium

was down 1.3% at $2,154.99.

(Reporting by Ashitha Shivaprasad and Arundhati Sarkar in

Bengaluru; Editing by Krishna Chandra Eluri and Shailesh Kuber)

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