Gold slips further from 15-month peak as dollar recovers

By Jan Harvey

LONDON (Reuters) - Gold fell further from this week's 15-month high on Wednesday as the dollar recovered from a slide to its lowest in over a year, with some investors cashing in gains after the metal failed to establish a foothold above $1,300 an ounce.

The metal has risen more than 20 percent this year as expectations faded that the Federal Reserve would push ahead with U.S. interest rate hikes.

It rallied sharply last week as the dollar slumped versus the yen, hitting its highest since January 2015 on Monday at $1,303.60 an ounce, but has struggled to maintain those gains.

 

Spot gold > was down 0.4 percent at $1,280.46 an ounce at 0935 GMT, while U.S. gold futures for June delivery were down $9.10 an ounce at $1,282.70.

The yen and the euro both retreated from long-term highs against the dollar on Wednesday as markets looked to sentiment surveys in Europe and a series of U.S. jobs releases due by the end of the week for fresh direction. [FRX/]

"We haven't really stepped off from the idea that the dollar has further to go on the upside, and that should probably take some of the steam out of gold," Deutsche Bank analyst Michael Hsueh said.

"From a rates perspective, we think the 10-year real rate will end the year about 30 basis points higher from where it is now, which should detract from gold's appeal."

Gold is highly exposed to interest rates and returns on other assets, as rising rates lift the opportunity cost of holding non-yielding bullion.

Analysts are awaiting U.S. non-farm payrolls data on Friday for clues on the outlook for the U.S. economy, and consequently monetary policy.

Atlanta Fed President Dennis Lockhart said on Tuesday the United States could see two more interest rate rises this year, while San Francisco Fed President John Williams said he would support a rate hike in June as long as he sees continued progress on the economy, inflation and jobs.

Uncertainty over the timing of rate moves is keeping investors cautious on gold, helping limit any moves.

"The difficulty gold is experiencing in staying above $1,300 does not necessarily mean the bull rally is ending. But the rally may be tired and in need of consolidation. This can trigger profit-taking," HSBC said in a note.

Among other precious metals, silver > was down 0.8 percent at $17.29 an ounce, while platinum > was down 0.5 percent at $1,055.28 an ounce and palladium > was down 1.1 percent at $599.22 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Jon Boyle)