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Gold holds losses as U.S. rate hike views boost dollar

Jan 4 (Reuters) – Gold prices eased early on Thursday, extending losses from the previous session as the precious metal retreated from more than 3-1/2-month highs due to a firmer dollar on expectations of further U.S. interest rate hikes. FUNDAMENTALS * Spot gold was down 0.3 percent at $1,308.83 an ounce at 0058 GMT. * The yellow metal hit its highest since Sept. 15 at $1,321.33 on Wednesday, but dropped as the dollar recovered from over 3-month lows. It fell further after the Federal Reserve released minutes of its December policy meeting which increased expectations of more U.S. rate hikes. * The reversal on Wednesday saw spot gold post its first day of losses in nearly three weeks. * Although the Fed’s meeting minutes showed some disagreement between policy hawks and doves, “the tax cuts were seen as very beneficial for economy. A higher GDP and higher consumer spending would boost the possibility for more rate hikes, which would put pressure on gold,” said Bob Haberkorn, senior market strategist for RJO Futures in Chicago. * Gold is highly sensitive to rising U.S. interest rates because it increases the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. * U.S. gold futures were down 0.6 percent at $1,310.60 an ounce. * The short-term technical outlook and profit taking were also seen pressuring gold after the precious metal rallied $85 from nearly 5-month lows in mid-December. * Spot gold’s 14-day relative strength index (RSI) touched 75 on Tuesday, it highest since September 2017. An RSI above 70 indicates a commodity is overbought and could herald a price correction, technical analysts said. * The dollar index , which measures the greenback against a basket of six major currencies, was up 0.1 percent at 92.246 after falling to a more than three-month low on Tuesday. * Asian shares scaled a 10-year high on Thursday as solid economic data from the United States and Germany reinforced investors’ optimism while oil prices hovered at 2-1/2-year high with unrest in Iran stoking supply disruption concerns. * U.S. factory activity increased more than expected in December, boosted by a surge in new orders growth, in a further sign of strong economic momentum at the end of 2017. * In Germany, Europe’s economic power house, the unemployment rate hit a record low of 5.5 percent in December, underpinning a broad-based economic upswing. DATA AHEAD 0145 China Service sector PMI Dec 0850 France Final composite PMI Dec 0850 France Final service sector PMI Dec 0855 Germany Final composite PMI Dec 0855 Germany Final service sector PMI Dec 0900 Euro Zone Final Service sector PMI Dec 0900 Euro Zone Final composite PMI Dec 0930 U.K. Mortgage approvals Nov 0930 U.K. Service sector PMI Dec 1230 U.S. Companies’ planned layoffs Dec 1315 U.S. ADP employment report Dec 1445 U.S. Final service sector PMI Dec 1445 U.S. Final manufacturing PMI Dec (Reporting by Nallur Sethuraman in Bengaluru; editing by Richard Pullin)

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