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1st LD Writethru: Gold down on stronger U.S. equities, dollar

Xinhua, March 2, 2016 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange fell on Tuesday as U.S. equities rebounded sharply and the U.S. dollar also rose.

The most active gold contract for April delivery fell 3.6 U.S. dollars, or 0.29 percent, to settle at 1,230.80 dollars per ounce.

The precious metal came under pressure as the U.S. Dow Jones Industrial Average rose by 325 points, or 1.97 percent as of 17:40 GMT. Analysts noted that when equities post losses, the precious metal usually goes up, as investors are seeking safe haven assets.

The U.S. Dollar Index, a measure of the dollar against a basket of major currencies, rose by 0.26 percent to 98.41 as of 17:40 GMT. Gold and the dollar typically move in opposite directions.

A report released by the Institute for Supply Management (ISM) also put pressure on the precious metal. The ISM manufacturing index posted a gain of 1.3 to a 49.5 level, which was better than expected. Analysts believed the report may contribute to a more optimistic outlook on the U.S. economy, dampening the safe haven demand for gold.

Traders will be watching for more economic data due out later this week. The ADP employment report will be released on Wednesday, weekly jobless claims on Thursday, and international trade and the big jobs report on Friday.

Analysts believe that despite the positive news for the U.S. equities on Tuesday, a delay in the U.S. Federal Reserve's rate hike remains inevitable due to global economic instability.

Prior to Fed Chairwoman Janet Yellen's address to the U.S. Congress on Feb. 10, the central bank hinted that it could still raise rates in March. However Yellen later testified to Congress that the increases would be gradual, many analysts believe that the next rate hike, from a 0.50 rate to a 0.75 rate will occur much later in the year.

Traders are wagering that, at the earliest, the Fed may raise rates from 0.50 to 0.75 during the April Federal Open Market Committee (FOMC) meeting. According to the CMEGroup's Fedwatch tool, the current implied probability of a hike from 0.50 to 0.75 is at 19 percent at the April 2016 meeting, and 35 percent at the June 2016 meeting.

Silver for May delivery dropped 16.2 cents, or 1.09 percent, to close at 14.756 dollars per ounce. Platinum for April delivery added 2.4 dollars, or 0.26 percent, to close at 936.70 dollars per ounce. Enditem