PRECIOUS-Gold on track for biggest weekly dip in eight on Fed rate outlook – by Koustav Samanta (Reuters U.K. – May 20, 2016)

BENGALURU, May 20 Gold steadied after two days of losses on Friday, but was set for its biggest weekly slide in eight weeks on the back of a firmer dollar and indications from the U.S. Federal Reserve that it could raise interest raise rates sooner than expected.

New York Fed President William Dudley said on Thursday there was a strong sense among the central bank officials that markets were underestimating the probability of policy tightening and that the Fed was on track for a rate hike in June or July.

The comments came a day after the minutes of the Fed’s April meeting revealed that most policymakers felt a rate increase might be appropriate as early as next month.

Spot gold was little changed at $1,254 per ounce at 0647 GMT, near a three-week low of $1,244 reached in the previous session. The safe-haven metal is down 1.5 percent for the week, its biggest drop since the week ended March 25.

“The gold environment is now substantially different from what was apparent several weeks ago when a weaker dollar and a benign rate environment were providing an element of support,” INTL FCStone analyst Edward Meir said in a note. :This is no longer the case, as both these variables are no longer as constructive.”

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