PRECIOUS-Gold falls 1 pct as Yellen remarks on rates boost dollar – Reuters


* Gold gives back some of sharp overnight gains

* Dollar index rises after Yellen comments

* Platinum on track for biggest weekly drop since mid-July

* Graphic-Platinum vs gold: link.reuters.com/xez92s

(Updates prices, adds comment)

By Jan Harvey

LONDON, Sept 25 (Reuters) – Gold fell from one-month highs
on Friday after Federal Reserve Chair Janet Yellen kept the door
open to an increase in interest rates later this year, sparking
a rally in the dollar.

Yellen said in a speech on Thursday that she expected the
U.S. central bank to start raising rates later in 2015, as long
as inflation remained stable and the U.S. economy was strong
enough to boost employment.

Expectations for a rise in ultra-low rates, which have cut
the opportunity cost of holding gold while weighing on the
dollar, have helped push the metal down 5 percent this year.

Gold rallied after the Fed opted at its September policy
meeting to keep rates on hold, hitting its highest since Aug. 25
on Thursday as dollar weakness prompted a wave of short
covering. It has failed to maintain those gains, however.

Spot gold was down 0.6 percent at $1,146.86 an ounce
at 1340 GMT, having climbed 2.1 percent on Thursday, its biggest
one-day rise since January. U.S. gold futures for
December delivery were down $6.90 an ounce at $1,146.90.

“The sell-off is most likely on the clarity from the Fed on
a rate hike in December,” Pradeep Unni at Richcomm Global
Services said. “It’s clear from (Yellen’s) talk that the Fed
paused in September only for the global markets’ sake.”

“Commodities, especially bullion, should extend their sell-
off.”

Yellen’s speech sent the dollar to a five-week high against
a basket of major currencies, and lifted it 0.7 percent
against the euro. The U.S. currency extended gains after data
showed the U.S. economy expanded more than previously estimated
in the second quarter.

The world’s top gold-backed exchange-traded fund, SPDR Gold
Shares, saw a third straight day of inflows, with its
holdings up 3.87 tonnes to 680.27 tonnes on Thursday.

The central banks of Russia and Kazakhstan raised their gold
holdings for a sixth straight month in August, while Jordan and
the United Arab Emirates both bolstered their reserves in July.

Silver was up 0.1 percent at $15.13 an ounce, while
platinum was down 0.9 percent at $943.74 an ounce.
Palladium was up 1.5 percent at $663.25 an ounce, off an
earlier near 12-week high at $674.50.

Platinum hit a 6-1/2-year low on Wednesday and is set
for its biggest weekly drop since mid-July on fears that demand
from the auto sector, where the metal is used in diesel
catalysts, could fall following the Volkswagen emissions
scandal.

In contrast, Palladium, which is used more heavily in
gasoline autocatalysts, is poised for its biggest weekly rise
since March 2013, up 8 percent, on expectations that consumers
could move away towards gasoline vehicles.

(Additional reporting by A. Ananthalakshmi in Singapore;
editing by Susan Thomas and Susan Fenton)