PRECIOUS-Gold slips to 16-week low on firm equities, steady dollar – by Clara Denina (Reuters U.S. – May 29, 2014)

LONDON, May 29 (Reuters) – Gold extended losses to a third straight session on Thursday, hitting fresh 16-week lows on investor risk appetite and as the dollar hovered near a two-month high, while weak physical demand in top buyer China also weighed.

Spot gold fell to $1,251.50 an ounce – its lowest since Feb. 4 – in earlier trade and was down 0.4 percent at $1,253.33 by 1200 GMT. It dropped nearly 3 percent over the past two sessions.

U.S. gold futures for June delivery were down $6.20 an ounce at $1,253.10 an ounce. “Gold seems to have found a new level below its previous trading range between $1,280 and $1,310… and the next significant support lies around $1,238- $1,240,” Mitsubishi Corp analyst Jonathan Butler said.

The dollar hovered just below a two-month high against a basket of major currencies, but gains were capped by lower 10-year U.S. Treasury yields, which stood below 2.5 percent. Global shares traded near an all-time peak on bets the European Central Bank would unveil new stimulus measures next week.

ECB policymakers have opened the door to a rate cut and to a refinancing operation aimed at supporting businesses when its board meets on June 5.

Higher equities dent the precious metal’s appeal as a hedge against risk, while returns on U.S. bonds are closely watched by the gold market, given that the metal pays no interest.

“There is some further strengthening of the dollar to come potentially and that should similarly put pressure on gold and on a macro level attract some further buying of U.S. treasuries, pushing down the yields,” Butler said.

The market was awaiting U.S. weekly jobless claims and preliminary GDP data for the first quarter for further clues about the economy.

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