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Gold slips from three-week high as equities rise, dollar rebounds

by April 13, 2016 General

By Jan Harvey

LONDON (Reuters) – Gold slipped from the previous day’s three-week high on Wednesday as European stocks jumped after upbeat Chinese trade data allayed concerns over the outlook for its economy, and as the dollar regained some poise.

The U.S. dollar rose 0.6 percent against a currency basket, having slid to its lowest in nearly 8 months in the previous session, while stocks jumped 2 percent.

Spot gold was down 0.9 percent at $1,244.25 an ounce by 0915 GMT, while U.S. gold futures for June delivery were down $14.00 an ounce at $1,246.90.

The metal reached its strongest since March 18 on Tuesday at $1,262.60 an ounce as the dollar slid, but struggled to maintain those gains as the U.S. currency rebounded and stock markets rose.

“Stronger equities and a relatively stronger dollar have put some pressure on gold, but it has still held nicely and we are bouncing back up a bit,” MKS’ head of trading Afshin Nabavi said. “We have some PPI news today out of the United States, so I guess we have to see how the dollar reacts to the numbers.”

“But overall, we couldn’t break $1,265 on the upside yesterday, and gold looks like a good buy around $1,240, so I would say that that is the trading range. Physical (demand) continues to be very, very slow.”

Gold had its strongest quarter in 30 years in the three months to March, with the dollar on the back foot as investors scaled back expectations of rate hikes by the Federal Reserve. The dollar has shed over 4 percent versus a basket of currencies this year.

Fed policymakers signalled in December that four hikes would probably be needed this year, but cut their view in March to two rate increases for 2016. Markets are factoring in only one rate hike, but comments from two Fed officials on Tuesday added to the uncertainty.

Among other precious metals, silver was down 0.7 percent at $16.04 an ounce, after hitting a 5-1/2-month high of $16.21 on Tuesday.

The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, slid to a 3-1/2 month low at 77.2 as silver outperformed gold.

“Retail demand for coins and small bars and light institutional buying in the paper markets has boosted silver,” HSBC said in a note. “We think the ratio will narrow further as price sensitive buyers who want to participate in precious metals, turn more to silver.”

Platinum, which climbed to a one-month high on Tuesday at $1,001.88, was at $992.36 an ounce, down 0.4 percent. Palladium was up 0.2 percent at $545.50 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore. Editing by Jane Merriman)