Gold falls below $1,300 as strong economic data hurts

Gold erased early gains on Tuesday, struggling to stay above USD 1,300, as strong global economic data dented its safe-haven appeal and physical buying in top consumers India and China remained subdued.

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The metal rose early in Asian trading on a weaker dollar but failed to find support amid lacklustre demand in China, the second biggest gold buyer. Losses were exacerbated by technical selling once the price fell below USD 1,300.

Spot gold was down 0.6 percent at USD 1,295.91 an ounce by 0251 GMT, hovering near a two-week low.

"Once we break below USD 1,300 and then USD 1,295, it could go all the way to USD 1,280," said one precious metals trader in Hong Kong. "There is nothing much to hold it up today as we have seen strong data, and physical demand is quiet."

Growth in the US services sector rebounded from a three-year low, data showed on Monday, while British businesses boomed and activity at euro zone companies expanded, albeit modestly, in July for the first time in 18 months.

Gold has lost close to a quarter of its value this year on fears the US Federal Reserve will curb its commodities-friendly bond purchases on signs of economic recovery.

The Fed is nearer to dialling back its massive bond-buying programme after the unemployment rate dropped last month, Dallas Fed President Richard Fisher said on Monday.

Gold hit a two-week low of USD 1,282.69 on Friday on strong US economic growth and robust factory activity. However, it rebounded after a weak jobs report.

"There is not much technical support further down until USD 1,284," ANZ analysts said in a note on Tuesday.

Gold importers in top bullion consumer India stayed on the sidelines for a third straight week due to policy uncertainty on shipments and supporting premiums.

In China, demand has fallen off in recent weeks, dealers say, as indicated by falling premiums. Gold prices on the Shanghai Gold Exchange fell about 1 percent.

Premiums to London spot prices in Hong Kong - a key supplier to China - have fallen to about USD 3-USD 4 an ounce, dealers said, from USD 5 two weeks ago.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.2 percent to 917.14 tonnes on Monday.