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PRECIOUS-Gold inches lower on rate hike expectations by Federal Reserve

       * U.S. producer prices fall in July
    * U.S. weekly jobless claims rise for second straight week

 (Updates prices)
    By Ashitha Shivaprasad
    Aug 11 (Reuters) - Gold prices edged lower on Thursday,
weighed down by prospects of more rate hikes by the U.S. Federal
Reserve even as data pointed to signs of inflation peaking.
    Spot gold        fell 0.1% to $1,789.83 per ounce by 1741
GMT. U.S. gold futures        settled down 0.4% at $1,807.2.
    "Gold's been lingering near the key $1,800 level as the
market has toned down rate hike expectations, which has also
weakened the dollar," although most Federal Reserve commentary
continues to hint at more rate increases, said David Meger,
director of metals trading at High Ridge Futures.
   "The bulk of the rate hikes are already priced into the gold
market and what we're trading on is the differences in
expectations moving forward."
    Investors took stock of data showing U.S. producer prices
unexpectedly fell in July amid a drop in the cost for energy
products, with underlying producer inflation appearing to be on
a downward trend.
    "Overall, the sentiment remains positive and the path of
least resistance remains to the upside for precious metals for
now as investors look forward to the end of aggressive rate
hikes," said Fawad Razaqzada, market analyst at City Index.
    Gold, which yields no interest, got a slight fillip on
Wednesday as relatively tame July U.S. CPI numbers toned down
bets for aggressive rate hikes from the Federal Reserve.

    But some of that optimism faded after Fed policymakers noted
that they would continue to tighten monetary policy until price
pressures were fully broken.
    Meanwhile, U.S. weekly jobless claims rose for a second
straight week, the Labor Department said on Thursday, indicating
some softening in the labor market.
    Spot silver        fell 1.2% to $20.32 per ounce, platinum
       rose 1.7% to $957.54, while palladium        was up 2.3%
to $2,291.78.

 (Reporting by Ashitha Shivaprasad and Arundhati Sarkar in
Bengaluru; Editing by Shailesh Kuber and Krishna Chandra Eluri)

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