Gold holds steady as other assets suffer

By Zandi Shabalala

LONDON (Reuters) - Gold held its ground on Monday, with pressure from speculation over a potential increase in U.S. interest rates this month offset by the metal's safe-haven appeal amid widespread weakness across other assets.

Spot gold was steady at $1,327.23 an ounce at 1152 GMT, with U.S. gold futures down 0.3 percent at $1,330.70.

A chorus of hawkish comments from Federal Reserve officials kept expectations alive for a September rate increase despite a recent spate of disappointing economic data.

After Boston Fed President Eric Rosengren spoke on Friday, odds on a rate rise in September rose to 30 percent probability from 24 percent before his comments.

 

"The gold markets looked at other markets and thought the panic is a reason to hold gold. On the other hand, markets are thinking there might be a rate hike," said Citigroup analyst David Wilson, adding that the metal held up well compared with other commodities.

"There are still a lot of risk issues out there that investors are concerned about."

Gold, often seen as an alternative investment in times of geopolitical and financial uncertainty, benefited from the risk-averse sentiment in the market along with other safe-haven assets, such as the Japanese yen and U.S. Treasuries.

Fed governor Lael Brainard is scheduled to give a talk in Chicago later on Monday, a day before the central bank's communications blackout takes effect in the build-up to next week's policy meeting .

There is chance for some more volatility ahead with Brainard's speech, MKS PAMP Group said in note.

"If rate concerns really rattle the financial markets, more profound equity market declines could set off renewed safe-haven purchases," HSBC analyst James Steel said, adding that a hawkish speech could put gold under selling pressure.

Hedge funds and money managers increased their net long position in COMEX gold contracts to a nine-week high in the week to Sept. 6 and also raised a bullish stance in silver, U.S. Commodity Futures Trading Commission data showed on Friday.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 1.12 percent to 939.94 tonnes on Friday.[GOL/ETF]

Silver shed 1.2 percent to $18.83 an ounce, having touched its lowest since Sept. 2 at $18.75.

Platinum fell 0.7 percent to $1,050.30 and palladium was down 1.4 percent at $665.13, both at their lowest level in more than a week.

(Additional reporting by Swati Verma and Nallur Sethuraman in Bengaluru; Editing by David Goodman)