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PRECIOUS-Gold at 5-year low on Fed rate rise prospect, traders eye China reserves

Published 18/07/2015, 04:57 am
© Reuters.  PRECIOUS-Gold at 5-year low on Fed rate rise prospect, traders eye China reserves
DXY
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* Gold headed toward fourth straight weekly fall

* China gold reserves up 57 pct at end-June

* Dollar at highest since April vs major currencies (Recasts; updates prices; adds comment, byline, NEW YORK dateline)

By Marcy Nicholson and Clara Denina

NEW YORK/LONDON, July 17 (Reuters) - Gold fell to a five-year low on Friday, pressured by a strong dollar and expectations for a U.S. rate hike this year, and as China bought less than expected over the past six years.

Platinum fell below the key $1,000-an-ounce level for the first time in more than six years while palladium extended losses to hit its lowest since November 2012. ID:nL5N0ZX1GM

China's gold reserves were up 57 percent at the end of June, from the last time it adjusted its reserve figures more than six years ago, the central bank said. Despite the tonnage increase, gold now accounts for 1.65 percent of China's total forex reserves, against 1.8 percent in June 2009. ID:nL4N0ZX39R

The reduced ratio suggested China will increase its bullion purchases, but the market focused elsewhere, traders said.

"The market's saying China's been buying gold but they bought a lot less than what they should have," said Phillip Streible, senior commodities broker for RJO Futures in Chicago.

Spot gold XAU= dropped 1.1 percent to its lowest since April 2010 at $1,130.70 an ounce and was last down 1 percent at $1,133.13. It was on track for a 2.6 percent weekly fall, the biggest since early March.

Spot platinum XPT= fell 1.4 percent to $991 an ounce, the lowest since February 2009.

"If the low figure is correct then that is actually very bullish because there is plenty of scope for continued buying for many years to come," said Ross Norman, chief executive of bullion brokerage Sharps Pixley in London, referring to China's gold reserves.

U.S. August gold futures GCv1 settled down 1 percent at $1,131.90 an ounce.

"The weakness we are seeing is related to the strength of the U.S. dollar," said Norbert Ruecker, head of commodity research at Julius Baer.

The dollar index .DXY rose to its highest since April on strong U.S. jobs data, while global shares slipped after disappointing corporate results. MKTS/GLOB

"Gold is finding a lot of headwinds from multiple sources: we have seen the Greek risk fade and the focus return to the U.S. and Janet Yellen," Saxo Bank Senior Manager Ole Hansen said.

Gold's 3 percent fall so far this year has failed to spur demand in top consumers in Asia with domestic prices in No. 2 market India remaining at a discount to global spot prices. GOL/AS

Palladium XPD= slipped 2.5 percent to $613.47, its weakest since November 2012. Spot silver XAG= was down 0.9 percent at $14.84 an ounce.

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