By Sethuraman N R
(Reuters) - Gold fell to a six-week low on Thursday as the dollar rose to a two-week high on expectations that the U.S. Federal Reserve may raise interest rates as early as June.
Spot gold fell 0.3 percent to $1,234.52 per ounce by 0724 GMT, after hitting its lowest since March 21 at $1,232.60 earlier in the session.
It fell 1.5 percent on Wednesday - its worst single-day drop since Nov. 23 - breaching both its 50-day and 200-day moving averages.
U.S. gold futures fell more than 1 percent to $1,235.40 an ounce.
The dollar index, which measures the greenback against a basket of currencies, was up 0.2 percent at 99.400 on Thursday, after touching a two-week high of 99.462
"With the safe-haven premium coming off gold, there was enough to break the camel's back. Any small rallies are going to get sold and gold is set for a deeper correction towards the $1,200 level," said Jeffrey Halley, senior market analyst at OANDA.
The U.S. Federal Reserve kept interest rates unchanged on Wednesday, downplaying weak first-quarter economic growth while emphasizing the strength of the labour market, signalling it was still on track for two more rate rises this year.
"The price action in gold since mid-April has been technically bearish. The Fed has basically put the ship back on course with regard to their intentions to continue hiking rates," said Halley.
Higher rates would reduce demand for non-interest bearing gold and would also make the dollar-denominated metal more expensive for buyers paying with other currencies.
Investors will now focus on Friday's monthly U.S. nonfarm payrolls report for further clues on the Fed's likely rate hike trajectory. Economists polled by Reuters expect U.S. employers to have added 185,000 jobs in April, up from 98,000 in March.
"It seems like the decline (in precious metals) could continue somewhat further," INTL FCStone analyst Edward Meir said. "However, we do expect a period of consolidation to set in fairly shortly and do not see a substantial drop below the $1,200 level for gold anytime soon."
Spot silver rose 0.2 percent to $16.42, after hitting a near four-month low of $16.37 on Wednesday. The grey metal has fallen over 12 percent since touching a 5-month high of $18.65 in mid April.
Platinum was up 0.4 percent at $896.15. The metal clung to its previous session low of $890.50, a level not seen since late December.
Palladium fell 0.2 percent to $797.50, extending its nearly 2 percent drop from the previous session.
(Reporting By Nallur Sethuraman in Bengaluru; Editing by Biju Dwarakanath and Tom Hogue)
Disclaimer: No Business Standard Journalist was involved in creation of this content
