GO
Loading...

PRECIOUS-Gold hits 5-week low on firmer dollar, U.S. rate hike fears

* Dollar index up 0.2 pct after Fed's Plosser, ECB

* ETF holdings up; physical buyers have yet to appear

* Coming Up: U.S. Consumer confidence; 1400 GMT

(Recasts, updates prices)

LONDON, March 25 (Reuters) - Gold fell to its lowest in more than five weeks on Tuesday, as the dollar edged higher on after a top Federal Reserve official reinforced the likelihood of higher U.S. interest rates in the first half of 2015.

In an interview with CNBC, Philadelphia Federal Reserve President Charles Plosser said that Fed Chair Janet Yellen has not made a mistake about the timing of signals on possible rate hikes at the FOMC meeting last week.

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

Spot gold, higher initially, hit its lowest since Feb. 14 at $1,305.50 an ounce after the Fed's official comments. It was down 0.1 percent to $1,307.79 by 1242 GMT.

U.S. gold futures fell $2.60 to $1,308.50 an ounce.

"Investors are moving on to the macroeconomic factors although there is still a lot of talk of sanctions against Russia," Mitsubishi analyst Jonathan Butler said.

"The outlook for gold looks bearish given what we just heard from the Fed, the possible rise in interest rates soon after the QE tapering is done."

The metal hit a six-month high of $1,391.76 last week as mounting geopolitical tensions and fears over slowing economic growth spurred demand for the metal as an insurance against risk.

"With the price unable to break through $1,400 recently, selling has returned to the market and it remains back on track for lower numbers," Societe Generale head of research Asia Mark Keenan said.

The dollar rose 0.2 percent against a basket of major currencies, also helped by euro weakness after European Central Bank 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.

A batch of U.S. economic data, including readings on consumer confidence and new home sales later on Tuesday should give more clues on the strength of the economy.

Investors were also eyeing the Ukraine crisis for trading cues. U.S. President Barack Obama and major industrialised allies warned Russia that it faced damaging economic sanctions if it took further action to destabilise Ukraine following the seizure of Crimea.

As a gauge of investor interest, holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, rose to their highest since December at 821.47 tonnes on Monday.

PHYSICAL BUYING SUBDUED

Physical dealers said demand from jewellers and retail investors was subdued, keeping premiums for gold bars little changed in Singapore at $1 an ounce to the spot London prices.

"To be very honest, physical demand hasn't picked up. I don't know what customers are waiting for. Prices are a lot cheaper than last week, but the demand is not there," said a dealer in Singapore.

Dealers in Hong Kong complained that a weak yuan and discounted prices on the Shanghai Gold Exchange had curbed buying interest from China, the world's top consumer.

Among other precious metals, silver rose 0.7 percent to $20.02 an ounce and platinum gained 0.3 percent to $1,426.50 an ounce. Palladium slipped 1.3 percent to $781.00 an ounce, having touched its highest since August 2011 at $799.50 in the previous session. It had been boosted by a strike in South Africa, simmering tensions over Ukraine and the launch of two palladium-backed exchange-traded funds in Johannesburg.

Platinum producers Anglo American Platinum, Impala Platinum and Lonmin said on Tuesday a strike now in its ninth week at their South African mines was causing irreparable damage to the sector and local economy.

(Additional reporting by Lewa Pardomuan in; Singapore; editing by Keiron Henderson)