By Zandi Shabalala
LONDON (Reuters) - Gold hovered near 10-month lows on Tuesday weighed down by expectations that U.S. interest rates will go up this month, a view reinforced by a string of positive economic data.
"There is a negative sentiment on precious metals lately mainly because of the upcoming environment; the expectation (of a) higher dollar and higher interest rates," ABN Amro's commodity strategist Georgette Boele said.
Spot gold was barely changed, up 0.1 percent at $1,171.62 an ounce, by 1326 GMT. It touched $1,157 an ounce on Monday, its lowest since Feb. 5.
U.S. gold futures shed 0.2 percent to $1,174.10 per ounce.
Gold is highly exposed to interest rates - particularly U.S. rates - as higher rates lift the opportunity cost of holding non-yielding assets such as gold and boost the dollar, in which bullion is priced.
Recent upbeat U.S. data, including non-farm payrolls and factory and services sector activity, point to a recovery in the world's biggest economy, clearing the way for the Federal Reserve to raise interest rates next week.
Interest rate futures imply traders see a 93 percent chance of the Fed raising rates by a quarter point to 0.50-0.75 percent next week, CME Group's FedWatch showed.
However, Commerzbank said it expected the 2016 gold rally to resume next year after its run fuelled by investment demand lost steam in the last quarter.
"The headwind from U.S. dollar appreciation and the rise of bond yields should abate and investment demand should pick up again also given the numerous risk factors," the bank said.
Fed officials cautioned on Monday that the incoming Trump administration's economic plans should not be cast as if the economy is in crisis, but instead be designed to help the economy's long-run prospects.
Fed officials worry there is risk that overly aggressive fiscal, tax and other changes could become inflationary given the economy's current strength.
Holdings of the SPDR Gold Trust, the world's largest gold-backed ETF fell 0.04 percent to 869.90 tonnes on Monday.
Among other precious metals, silver was up 0.5 percent at $16.82 per ounce and platinum rose 1.2 percent to $935.25 an ounce, after touching its highest since Nov. 17.
Palladium added 0.7 percent to $748.25 an ounce.
(Additional reporting by Swati Verma and Nallur Sethuraman in Bengaluru; editing by Mark Potter and David Clarke)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
