Gold languishes below US$1,170 ahead of US jobs data

[SINGAPORE] Gold extended losses into a third session on Thursday, languishing close to its lowest in nearly four weeks due to a strong dollar and the prospect of higher US interest rates, with all eyes on US economic data due later in the day.

Spot gold fell US$1 to US$1,167.40 an ounce by 0330 GMT after dropping about 1 per cent in the previous two sessions. The metal hit US$1,166.35 on Tuesday, its lowest in nearly four weeks.

The dollar index eased slightly after hitting its highest in around three weeks earlier in the session, supported by strong US private employment data and weakness in the euro after Greece defaulted on a loan repayment to the International Monetary Fund.

With the Greek debt crisis failing to trigger strong safe-haven bids for gold, markets turned their focus to data on US nonfarm payrolls and durable goods due later in the day for clues on the strength of the economy and how that will affect Federal Reserve monetary policy.

"Gold's appeal as a safe-haven asset, clearly, has not really shone through in the past half-week. Not aiding gold's cause has been a rapidly strengthening dollar," said Howie Lee, an analyst at Phillip Futures.

Given the recent strong US economic data, "there may be a good chance gold could further decline today. We expect a strong US labour market report to send gold prices downwards to US$1,150," Mr Lee said.

The ADP National Employment Report on Wednesday showed 237,000 private-sector jobs were created in June, beating the median expectation among economists surveyed by Reuters of a gain of 218,000 jobs. The gain was the biggest in six months.

More encouraging data could prompt the Fed to raise rates sooner rather than later, hurting demand for non-interest-paying bullion.

Gold prices have been hamstrung by the prospect of higher US interest rates this year.

The focus in the Greek crisis is on Sunday's referendum.

Prime Minister Alexis Tsipras has urged Greeks to reject an international bailout deal, wrecking any prospect of repairing relations with European Union partners before the referendum, which may decide Greece's future in Europe.

There is scope for the Greek crisis to drive more risk-averse money into gold if it worsens to the point where Greece leaves the euro zone, or if there is contagion into other economies in the bloc, such as Italy, Portugal or Spain, traders said.

REUTERS