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Gold ends modestly higher; rate fears cap gains

AP

Gold futures managed to log a minor gain on Tuesday, as the dollar rose after stronger than forecast U.S. consumer confidence data and on expectations of higher U.S. interest rates in the first half of 2015.

The Conference Board, an industry group, said its index of consumer attitudes rose to 82.3, the highest since January 2008, from a upwardly revised 78.3 in February and against an expected reading of 78.6.

U.S. gold futures for April delivery settled 20 cents higher at $1,311.40 an ounce.

Spot gold hit its lowest since Feb. 14 at $1,305.50 an ounce soon after Philadelphia Federal Reserve President Charles Plosser said Fed Chair Janet Yellen had not made a mistake when she said there may be around six months between the bank ending its bond buying and starting to raise interest rates.

Low interest rates, which cut the opportunity cost of holding non-yielding bullion above other assets, had been an important factor driving bullion higher in recent years.

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Cash gold prices then gained 0.1 percent to $1,310.86, after European Central Bank (ECB) governing council member and Bundesbank chief Jens Weidmann said negative interest rates were an option the bank could use to counter strong gains in the single currency.

"Plosser's comments triggered that selloff in gold that took us down to $1,306 and then we had some dovish statement from the ECB, which took some heat off the metal," Saxo Bank senior manager Ole Hansen said.

In the short term, some technical support could take gold a bit higher, but in the longer term the outlook remains bearish, given higher interest rates and a stronger dollar, he added.

The dollar rose 0.2 percent against a basket of major currencies, partly in response to Weidmann's comments.

Investors were also watching the Ukraine crisis. The United States and major industrialised allies warned Russia it faced economic sanctions if it took further action to destabilise Ukraine following the seizure of Crimea.

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