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Gold falls more than 1 pct to 6-week low

Women look at jewellery at a shop in a gold market in Basra, southeast of Baghdad February 14, 2015. REUTERS/ Essam Al-Sudani/Files

By Jan Harvey

LONDON (Reuters) - Gold slid to six-week lows on Friday in holiday-thinned trade, as disappointment at its failure to hold above $1,200 an ounce this week and longer-term expectations for a U.S. rate rise undermined investor confidence.

Technical factors were also at play, with downward momentum picking up sharply as prices broke through their April low at $1,175 an ounce.

Spot gold was down 0.9 percent at $1,173.11 an ounce at 1308 GMT, while U.S. gold futures for June delivery were down $9.90 an ounce at $1,172.50. Earlier spot prices fell more than 1 percent to $1,170.90, their lowest since March 20.

Gold hit its highest since early April at $1,215 earlier this week, but failed to hold that level after the Federal Reserve signalled on Wednesday that it sees the recent slowdown in the U.S. economy as transitory, not ruling out an interest rate rise this year.

"There is still fall-out from the FOMC (Federal Open Market Committee) -- there has been a hiccup in the U.S. recovery, but certainly the view is that interest rates are going up, so gold is struggling," said Simon Weeks, head of precious metals at the Bank of Nova Scotia.

"On a thin bank holiday weekend, that will be exacerbated," he added. "$1,175 is just about holding at the moment, but that should open up the charts to $1,150."

Gold has traded in a narrow range over the last month on uncertainty over the timing of the Fed's first interest rate rise in nearly a decade, despite weakness in the dollar, which suffered its worst month in four years in April.

Markets are now awaiting U.S. ISM manufacturing numbers and University of Michigan sentiment data at 1400 GMT.

Strong data could shore up expectations the Fed is still on track to raise rates this year, which would lift the opportunity cost of holding non-yielding bullion while boosting the dollar.

Gold tends to move in an inverse relationship with the dollar. A stronger dollar makes the metal more expensive for holders of other currencies.

Major European markets, with the exception of London, were closed for the May Day holiday on Friday.

From a chart perspective, a weekly close for gold below the $1,180 support level could be the catalyst for a further pull-back, analysts said.

"This $1,130-1,180 support area could well come under examination in a more crucial way than we've seen recently," Societe Generale analyst Robin Bhar said.

In Asia, physical demand was light, with China and Singapore were closed for holidays.

Among other precious metals, silver was down 0.1 percent at $16.11 an ounce, while platinum was down 0.8 percent at $1,126.74 an ounce and palladium was down 0.3 percent at $770.50 an ounce.


(Additional reporting by Melanie Burton in Melbourne; Editing by Pravin Char and David Evans)