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Gold bound for worst quarter in over a year on hawkish Fed

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·2 min read
Employees cast ingots of 99.99 percent pure gold at the Krastsvetmet non-ferrous metals plant in Krasnoyarsk
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By Ashitha Shivaprasad

(Reuters) - Gold slipped on Thursday, heading for its worst quarter in five as a hawkish tone from global central banks dimmed appeal for the non-yielding asset.

Spot gold fell 0.6% to $1,806.55 per ounce by 2:36 p.m. ET (1836 GMT), on track to fall more than 6% for the quarter. U.S. gold futures settled down 0.6% at $1,807.3.

"Gold is ending lower this quarter due to the tighter Federal Reserve policy suggestions. Also, there's a good chance that recession worries will bring down demand across commodities," said Jim Wyckoff, senior analyst at Kitco Metals.

Bringing down high inflation will be painful and could even crash growth, but it must be done quickly to prevent rapid price growth from becoming entrenched, the world's top central bank chiefs said at the European Central Bank's annual conference in Portugal.

The dollar index hovered near its recent two-decade peak and was headed for a 6% rise this quarter, making gold more expensive for overseas buyers. [USD/]

Gold briefly bounced after U.S. data showed the personal consumption expenditures price index rose 6.3% in May after advancing by the same margin in April. However, gold prices quickly moved back into the tight range it has been in for the past few sessions.

"The data initially gave traders the idea that since inflation wasn't any worse than last month, maybe the Fed won't be so aggressive, helping gold. However, the market is still firmly bearish and speculative sellers jumped in to push prices down," added Wyckoff.

Gold usually benefits from high inflation, but rising rates translate into higher opportunity cost of holding the non-interest bearing asset.

Spot silver fell 1.8% to $20.33 per ounce, platinum dipped 2.1% to $897.90 and palladium was down 1.3% at $1,936.07.

"If you're talking recession, it means less automotive production and industrial activity; this is hurting palladium," said Bart Melek, head of commodity strategies at TD Securities.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Krishna Chandra Eluri and Lisa Shumaker)