Gold edges higher as investors keep wary eye on Fed

By Peter Hobson

LONDON (Reuters) - A weaker dollar helped to push gold prices higher on Thursday, but gains were limited as the market waited for clues on the pace of U.S. interest rate increases from a meeting of the Federal Reserve next week.

Spot gold was up 0.2 percent at $1,298.26 an ounce by 1053 GMT, while U.S. gold futures for August delivery firmed by 0.1 percent to $1,302.40.

"The rise in prices is due to the dollar," said Capital Economics analyst Simona Gambarini. "The dollar has been the main driver of prices in recent weeks."

A weaker dollar is good for gold because it makes the metal cheaper for buyers using other currencies and can fuel demand.

 

However, Gambarini said investors were in wait-and-see mode ahead of the Fed meeting on June 12-13, when they expect both a rate rise and signals on the outlook for U.S. monetary policy.

Interest rates are important for gold because higher rates tend to boost the dollar and also push up bond yields, reducing the appeal of non-yielding bullion.

Gold fell from near 1-1/2 year highs around $1,350 in mid-April to below $1,300 last month as the dollar strengthened to 2018 highs, but prices have steadied after the rally faltered.

As well as the Fed meeting, investors were looking ahead to a summit between the leaders of the United States and North Korea on June 12 and a meeting of the European Central Bank (ECB) on June 14.

Both events could affect gold.

Tensions over Korea have supported gold prices, increasing demand for an asset viewed as a safe place to invest in times of geopolitical uncertainty.

Markets are meanwhile betting that the ECB will signal a winding down of its vast bond-buying programme, boosting the euro.

On the technical side, gold is consolidating below its 200-day moving average around $1,308 and prices were more likely to fall than to rise if gold failed to move above this level, Commerzbank analysts said.

Fibonacci technical support for gold was at $1,286, said analysts at ScotiaMocatta.

In other precious metals, silver was up 0.3 percent at $16.69 an ounce. The metal broke above its 100-day moving average on Wednesday and looked poised to move above the 200-day moving average, improving its technical outlook.

Commerzbank said the moves higher suggest a recovery towards $17.50-$17.74.

Platinum was down 0.1 percent at $901.20 an ounce, while palladium also eased by 0.1 percent to $1,015.01 after breaking above its 100-day and 200-day moving averages on Wednesday.

(Additional reporting by Karen Rodrigues in Bengaluru; Editing by David Goodman)