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Gold gains as equities, dollar retreat; Fed hike view caps rise

Gold fell one per cent on Thursday as dollar jumped versus the euro after the European Central Bank cut inflation forecasts, while a US jobs report that could provide clues on the timing of a Federal Reserve rate rise remained in focus.

[MANILA] Gold edged higher on Tuesday as equities faltered on mounting expectations that the US Federal Reserve will likely go ahead with an interest rate increase this month.

Fed Vice Chairman Stanley Fischer said on Saturday that US inflation will likely rebound as pressure from the dollar fades, allowing the US central bank to raise interest rates gradually.

Mr Fischer's comment sent Wall Street lower overnight and US stock futures stretched losses on Tuesday, with Asian shares also falling, led by China. The dollar similarly weakened as risk aversion favored the euro and yen. "We are seeing some general risk-off moves in the Asian timezone and some buying of gold would be consistent with that," Ric Spooner, chief market analyst at CMC Markets in Sydney.

Spot gold was up 0.5 per cent at US$1,139.60 an ounce by 0153 GMT, after an uneventful session on Monday.

Bullion ended August 3.5 per cent higher as worries over China's slowing economy sparked safe-haven bids, although the metal has since come off a seven-week top.

Growing indications that the Fed could lift rates on its next policy meeting on Sept 16-17 could limit gold's upside potential.

Mr Spooner said only another "fear-based" deep rout in global equities like that seen on Aug 24 following a slump in Chinese stocks would "dissuade the Fed from easing." "And I think if we did see a very strong number in the nonfarm payrolls this week, it would certainly give them an opportunity ... to make their move in September," he said.

But Mr Spooner said there is a chance that the US rate hike - which would be the first since 2006 - could induce profit-taking in the dollar and potentially buoy gold.

US gold for December delivery rose 0.6 per cent to US$1,139.20 an ounce.

MKS Group trader James Gardiner said he sees resistance for bullion at US$1,145 and then at US$1,150 with immediate support around US$1,125.

Spot palladium fell 0.8 per cent to US$594.05 an ounce and platinum eased 0.1 per cent to US$1,005.50. Silver edged up 0.2 per cent to US$14.63.