Gold hits 3-week low as US dollar firms

[BENGALURU] Gold edged lower on Friday to hit a three-week low and was on track for a second weekly fall, dragged down as upbeat US economic data supported the US dollar.

The US dollar index held near a two-week high after data showed the number of Americans filing for unemployment benefits fell more than expected last week.

Robust economic data could encourage the US Federal Reserve to raise interest rates again this year following a hike this week.

"The strengthening of the dollar (is weighing on gold)... and after the latest Fed interest rate hike people are waiting to see when the Fed will raise rates next," said Brian Lan, managing director at gold dealer GoldSilver Central in Singapore.

Higher interest rates tend to boost the US dollar, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

Spot gold had dropped 0.1 per cent to US$1,252.61 per ounce by 0406 GMT after touching its weakest since May 24 at US$1,251.05 earlier in the session. The metal has fallen about one per cent so far this week.

US gold futures for August delivery were nearly flat at US$1,254.5 per ounce.

"The fact that the dollar is nudging higher, should continue to pressure the market, while the churn in US equities is still not serious enough to warrant a flight to safety into the precious metal," said INTL FCStone analyst Edward Meir.

"We think gold will likely have another US$20-US$25 on the downside before encountering more serious support."

Meanwhile, holdings in SPDR Gold Trust , the world's largest gold-backed exchange-traded fund fell 0.14 per cent to 853.68 tonnes on Thursday.

Among other precious metals, spot silver was headed for its biggest weekly decline in six weeks and was flat on the day at US$16.71 per ounce. It fell to a low of US$16.64 in the previous session, its weakest since May 19.

"Price action in both gold and silver of late seems to imply that traders still have plenty of short-term long positioning on their books," said Jeffrey Halley, senior market analyst at Oanda.

"It may leave both metals vulnerable to a further washout into the weekend if the US dollar strength persists."

Platinum was up 0.3 per cent at US$922.45 per ounce, hovering near over one-month lows hit in the previous session.

Meanwhile, palladium fell 0.3 per cent to US$867.15 per ounce, as it moved towards its first weekly decline in four weeks.

REUTERS