* Palladium hits record high of $1,263.56/oz
* Palladium rises above gold for first time in 16 years
* Platinum declines to lowest in about 3 months
* GRAPHIC-2018 asset returns:
By K. Sathya Narayanan
Dec 5 (Reuters) - Gold slipped on Wednesday on expectations of
more interest rate hikes following remarks from a U.S. Federal Reserve
official and as some investors booked profits after prices hit their
highest in more than five weeks.
Palladium, on the other hand, surpassed the bullion for the first
time in about 16 years, to hit a new record high of $1,263.56 per
ounce as higher speculative interest and larger supply deficit boosted
the auto-catalyst metal.
Spot gold was down 0.2 percent at $1,236.11 per ounce at 13:45
p.m. EST (1845 GMT). U.S. gold futures settled down $4, or 0.3
percent, at $1,242.60.
"It's just the lack of interest in gold at the moment. Most
of the interest is in the bond market," said Walter Pehowich,
executive vice president of investment services at Dillon Gage Metals,
adding that investors were also locking in profits after Tuesday's gains.
Gold rose to its highest since Oct. 26 at $1,241.86 on Tuesday,
helped by a softer dollar which has been pressured by concerns about
weaker growth and bets that the U.S. Federal Reserve would end its
tightening campaign sooner than previously thought.
Fed Chairman Jerome Powell last Wednesday said U.S. interest rates
were nearing neutral levels, which markets interpreted that the
central bank would slowdown the pace of rate hikes.
However, New York Fed President John Williams on Tuesday said the
central bank should expect to continue raising interest rates
"over the next year or so" even while it pays close
attention to possible risks highlighted by financial markets.
"He is contradicting the Fed chairman. That caused some
downward pressure on the metal," Pehowich said.
The central bank is widely expected to raise rates at its policy
meeting on Dec. 18-19 and investors are keeping a close eye on signals
for the future path of interest rates next year.
"As long as the end of Fed interest rate hikes is still open,
the gold price is likely to suffer repeated temporary setbacks,"
Commerzbank analysts said in a note.
Higher interest rates increase the opportunity cost of holding the
Gold prices have fallen about 9 percent from a peak in April when
prices were trading around $1,365 per ounce.
"The latest positioning data from the futures market show
that there are extremely large speculative short positions in gold ...
This shows that speculators have little faith in the upside potential
for gold prices," ABN AMRO analyst Georgette Boele said in a note.
Platinum was down 1 percent at $795.80 per ounce after hitting
at $785, its lowest since Sept. 12, earlier in the session.
"People are buying palladium and selling platinum as a hedge.
They are thinking that palladium and platinum spread will continue to
widen and that makes palladium an interesting investment,"
Spot silver fell 0.4 percent to $14.46 per ounce.
(Reporting by K. Sathya Narayanan, Swati Verma and Nallur Sethuraman
in Bengaluru; Editing by Diane Craft and Richard Chang)
((Sathya.Narayanan@thomsonreuters.com; within U.S. +1 651 848 5832,
outside U.S. +91 80 6749 3226/1298; Reuters Messaging: email@example.com))