Gold slips as strong US data fuels Fed rate-hike bets

Representative image

Gold prices slipped to a near one-week low on Thursday as a better-than-expected private payrolls report suggested that the US labour market remains strong and fuelled expectations for more rate hikes from the Federal Reserve.

Spot gold was down 0.4% at $1,910.69 per ounce by 09:33 a.m. EDT (1332 GMT), while U.S. gold futures dropped 0.5% to $1,917.10.

U.S. private payrolls increased more than expected in June, indicating strength in the labour market despite growing risks of a recession from higher interest rates.

Two-year U.S. Treasury note yield rose to its highest level since June 2007 after employment data, while the dollar cut losses.

"The weakness that we're seeing in gold is reflective of the expectations for a Fed that is more likely to raise interest rates at the July meeting," said David Meger, director of metals trading at High Ridge Futures.

"We're seeing continuing jobless claims come down and the ADP private payroll numbers came out better than expected. As a result, we're seeing yields increasing and hence some more pressure applied to the gold market."

Data showed the number of Americans filing new claims for unemployment benefits increased moderately last week, pointing to only a gradual easing in labour market conditions.

Fed Bank of Dallas President Lorie Logan said that there was a case for a rate rise at the June policy meeting, in comments that affirmed her view that more rate increases will be needed to cool off a still strong economy.

Investors now see a nearly 95% chance of a 25-basis-point hike in July after last month's pause, according to CME's Fedwatch tool. High rates discourage investment in zero-yield gold.

Focus still remains on Friday's U.S. non-farm payrolls report for more clarity on the Fed rate-hike path.

Elsewhere, silver dipped 1.1% to $22.86 per ounce, platinum fell 1.6% to $900.97, while palladium eased 0.6% to $1,252.27.