NEW YORK/LONDON (Reuters) - Gold fell to a three-week low on Thursday, weighed down by a stronger dollar as investors began to assess the potential for another U.S. rate hike later in the year, supported by data showing a strong U.S. jobs market.
The losses in gold were limited, however, with bullion underpinned by myriad global uncertainties, including a report that U.S. President Donald Trump was under investigation.
"Just like in previous rate hikes, the next day the market starts looking at the probability of the next hike because everything was factored in beforehand," Natixis metals analyst Bernard Dahdah said.
The U.S. Federal Reserve raised interest rates by a notch as expected on Wednesday and indicated further tightening before the end of the year.
Spot gold XAU= fell 0.5 percent to $1,254.05 an ounce by 2:56 p.m. EDT (1856 GMT), after touching $1,251.18, the weakest since May 24.
U.S. gold futures GCcv1 for August delivery settled down 1.7 percent at $1,254.60.
U.S. data on Thursday bolstered the case for higher rates, as the number of Americans filing for unemployment benefits fell more than expected last week.
"If you just look at economics, there's a chance of more downside. The Fed was talking about another potential rate hike later this year, which is negative for gold. But there's still enough for people to worry about in geopolitics at different levels," Dahdah said.
Higher interest rates are negative for gold because they increase the opportunity cost of holding non-yielding gold by foregoing the chance of earning interest on cash holdings.
"We think that the price of the yellow metal will fall in the remainder of the year as the Fed hikes rates by more than the market currently anticipates and global risks fade," said Capital Economics in a note.
"We remain of the view that Fed tightening will prove too strong a headwind for the price of gold this year. Our end-2017 price forecast is $1,100 per ounce, down from about $1,255 today."
The dollar index .DXY rallied after the jobs data and following Wednesday's Fed meeting.
Among other precious metals, silver XAG= shed 0.8 percent to $16.74 per ounce after slipping to $16.64, the lowest since May 19.
Platinum XPT= dropped 1.6 percent to $920.99, having hit the lowest in over a month at $913.50, while palladium XPD= shed 0.2 percent to $861.49 per ounce after rallying by 25 percent so far this year.
"We're bullish on palladium compared to last year, but we think it has overshot," Dahdah said.
Additional reporting by Nithin Thomas Prasad and Vijaykumar Vedala in Bengaluru; Editing by Edmund Blair and Chizu Nomiyama