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PRECIOUS-Gold falls 1 pct as stocks rally, dollar rises

Published 10/09/2015, 12:13 am
© Reuters.  PRECIOUS-Gold falls 1 pct as stocks rally, dollar rises
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* Gold in tight range until Fed meet next week - analyst

* Physical markets mixed, providing little support

* GRAPHIC: Commodity returns http://link.reuters.com/reb25t (Updates prices, adds comment)

By Jan Harvey

LONDON, Sept 9 (Reuters) - Gold fell to a three-week low on Wednesday as stock markets strengthened and the dollar firmed, though prices remained hemmed into a narrow range ahead of next week's Federal Reserve meeting.

The gold market will be closely watching the U.S. central bank's next policy statement on Sept. 17 for clues on the timing of a U.S. interest rate rise.

Gold has benefited in recent years from ultra-low rates, which cut the opportunity cost of holding bullion while holding the dollar in check. Expectations rates will rise soon have helped push the metal down 5 percent this year.

Spot gold XAU= was down 1 percent at $1,110.11 an ounce at 1405 GMT, while U.S. gold futures GCv1 for December delivery were down $11.50 at $1,109.50.

"The dollar's back up again today, which is underpinning the fall, and there is possibly somre pressure from the resurgent equity market," Mitsubishi analyst Jonathan Butler said.

"We have another week to go before the Fed, and I think a September rate hike has been all but ruled out. The situation is just too uncertain."

Global shares surged on Wednesday, led by the biggest daily gains in Japan for seven years, helping to lift the dollar and oil prices as the prospect of more stimulus from China soothed investors rattled by recent market turmoil. MKTS/GLOB

Gold has failed to attract strong investor interest as a safe haven, despite the recent weakness in stocks because of worries over the Chinese economy, showing that the metal is struggling to find direction outside U.S. monetary policy, analysts say.

"In the run-up to the Fed's meeting next week, market participants are likely to be exercising restraint, so we are unlikely to see any pronounced price fluctuations," Commerzbank (XETRA:CBKG) said in a note.

The physical gold market has also been mixed, providing little support to global prices.

Gold prices in India are at a discount to the global benchmark for the first time since mid-July as a weak monsoon dampened demand in the world's second-biggest consumer. ID:nL4N11A1A0

In top consumer China, premiums edged higher on the Shanghai Gold Exchange to about $5 an ounce on Wednesday morning from last week's $4.

Among other precious metals, silver XAG= was down 1 percent at $14.67 an ounce, while platinum XPT= dropped by 2 percent to $982.99 and palladium XPD= fell 1.1 percent to $577.97.

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