Gold price slips after best day since April as dollar strengthens

London  (May 12) Gold fell back below $1,270 an ounce on Thursday as a strengthening dollar prompted some buyers to cash in gains after the metal posted its biggest daily rise this month in the previous session.

    Prices remained supported, however, by expectations the

Federal Reserve will hold off raising interest rates at its June

meeting, after hiking them for the first time in nearly a decade

in December.

    The metal has risen nearly 20 percent this year as

expectations for a near-term rate rise evaporated. Rising rates

increase the opportunity cost of holding non-yielding gold.

    Spot gold was down 0.7 percent at $1,268.46 an ounce

at 1130 GMT, while U.S. gold futures for June delivery

were down $5.60 at $1,269.90. The metal hit a 15-month high last

week at $1,303.60, before slipping back below $1,300.

    "The weakness in gold which we're experiencing today is

mainly due to the strength in the dollar, and also we're

approaching close to a very important level of $1,300," Naeem

Aslam, chief market analyst at Think Forex, said.

    The dollar index rose 0.25 percent on Thursday,

lifted by a drop in the yen as investors sold the currency amid

speculation the Bank of Japan could decide to expand its

monetary stimulus as soon as next month.

    Underlining optimism towards the metal, however, holdings of

the world's largest gold-backed exchange-traded fund, SPDR Gold

Shares, rose 2.7 tonnes to 841.9 tonnes on Wednesday, the

highest since December 2013.

    Surging inflows into gold-backed exchange-traded funds drove

global gold demand to its highest first-quarter total on record

this year at 1,290 tonnes, the World Gold Council (WGC) said,

despite a near 20 percent drop in jewellery demand.

    "While we hardly expect to see a repeat of the strong

investment demand of the first quarter, jewellery demand, which

is generally regarded as more stable, should pick up again,

meaning that the gold price should be well supported in the

medium term," Commerzbank said in a note.

    Demand in India, the world's second-biggest gold consumer,

could rise as much as 10 percent in 2016 on good monsoon

rainfall, the WGC added, despite consumer demand falling nearly

40 percent in the first quarter.   

    Spot silver was down 0.8 percent at $17.26 an ounce,

platinum fell 0.7 percent to $1,055.20, and palladium

 was down 0.6 percent at $600.96.

    GFMS analysts at Thomson Reuters said in a report on

Thursday that platinum prices were likely to have already posted

their lows for the year, with a return to supply shortfalls set

to hold the metal at an average $1,005 an ounce in 2016. It hit

a seven-year low of $806.31 an ounce in January.

Source: Reuters