Gold price eases on higher dollar, silver hits 3-week high

London (Aug 1)  Gold inched lower on Monday, retreating from a near 3-week high hit in the previous session, as the dollar recovered from the lows, but uncertainty on the Federal Reserve's interest rates path limited losses.

Spot gold was down 0.2 percent at $1,348.05 an ounce at 1135 GMT. Bullion hit $1,355.10 on Friday, its highest level since July 12, after after much slower-than-expected U.S. economic growth weighed on the dollar.
 U.S. gold eased 0.2 percent at $1,355.00 an ounce.

The U.S. Commerce Department reported that GDP grew at an
annual rate of 1.2 percent in the second quarter, far less than
economists' estimates of 2.6 percent growth.
    The data came after the U.S. Federal Reserve gave no hints
of any near-term interest rate rise as some had expected it to
at its monthly policy meeting last week.
    Gold is highly sensitive to rising U.S. interest rates, as
the opportunity cost of holding the non-yielding asset
increases, while boosting the dollar, in which it is priced.
    The dollar rose 0.2 percent against a basket of six
currencies, crawling away from its lowest since July 5 hit on
Friday. European equities fell slightly after a steadier start.
 
    "Although equities are performing well, there is concern
that that might be topping out, while the lack of clarity over
the Fed's interest rates policy is providing a negative real
yield environment that favours gold," ETF Securities analyst
Martin Arnold said.
    Top U.S. Fed policymakers held varying opinions about rate
hikes, with Dallas Fed President Robert Kaplan calling for
caution, while San Francisco Fed President John Williams
expected the central bank to raise interest rates up to two
times before year-end. 
    A sidelined Fed between now and year-end should weaken the
dollar, pushing gold to test July highs of $1,374 levels, with
an outside chance of getting to $1,400, INTL FCStone said in a
note.
    Markets will closely monitor this week's data, which
includes the closely watched monthly non-farm payrolls report on
Friday.
    "If (payrolls data) is ...weak, then people will change
their expectations about the U.S. economic prospects
drastically. If they are relatively good, bad GDP data could be
counterbalanced by good jobs data," said Jiang Shu, chief
analyst at Shandong Gold Group.
    Speculators increased their net long position in COMEX
silver contracts, but cut net long positions in gold, in the
week to July 26.
    Spot silver touched a 3-week high of $20.64 an ounce,
before steadying up 0.9 percent at $20.49.
    Platinum, which hit over 14-month highs on Friday,
was down 0.1 percent at $1,141.50 an ounce, while palladium
 was unchanged at $711.55. It hit its highest in over
9-1/2 months on Friday.

Source: Reuters