PRECIOUS-Gold down as strong shares, U.S. yields offset weaker dollar – by Clara Denina (Reuters U.S. – May 6,2015)

LONDON, May 6 (Reuters) – Gold edged down on Wednesday, as the impact of stronger European shares and higher U.S. real yields counteracted the effects of a weaker dollar and prospects that the Federal Reserve will not raise interest rates at its meeting in June.

Spot gold was down 0.2 percent at $1,190.53 an ounce by 1011 GMT, while U.S. gold futures for June delivery lost $3.20 an ounce at $1,190.00.

Gold was depressed by rebounding European shares as strong euro zone services data and corporate results offset a sell-off in the region’s government bonds and a rise in the euro.

The metal, which pays no interest, was also under pressure from a two-month high in the benchmark 10-year U.S. Treasury yield.

“One might be puzzled why the gold price is not reacting to a weaker dollar  but you have to look at U.S. real yields, which correlate the most to the gold price, and these have risen,” Macquarie analyst Matthew Turner said.

“That’s what’s driving gold prices…because we think the Fed is going to raise interest rates sooner than expected.”

The dollar fell 0.4 percent against a basket of currencies, after disappointing U.S. trade data for March painted an even bleaker picture of the economy in the first quarter.

The sluggish data added to the view that the Federal Reserve will not raise interest rates at a policy meeting in June, a factor that could boost demand for bullion, a non-interest-paying asset.

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