* Gold strength seen persisting on uncertainty
* Silver hits more than three-week high
* Platinum, palladium touch two-week highs
* GRAPHIC-2016 asset returns: reut.rs/1WAiOSC
(Recasts; adds quotes, updates prices; changes dateline,
By Devika Krishna Kumar and Zandi Shabalala
NEW YORK, Sept 7 Gold dipped on Wednesday,
losing momentum due to profit-taking after it soared by the most
in over two months in the previous session on economic data that
weakened the case for an imminent U.S. rate hike.
U.S. services sector activity slowed to a 6-1/2-year low in
August amid sharp drops in production and orders, pointing to
slower economic growth that further diminished prospects for a
near-term interest rate increase.
Meanwhile, U.S. non-manufacturing new orders index for
August fell to their lowest since December 2013.
The spate of weak data has weakened the case for a U.S. rate
hike immediately, boosting gold, which is highly exposed to
interest rates and returns on other assets. Rising rates lift
the opportunity cost of holding non-yielding bullion.
Spot gold was down 0.3 percent at $1,345.32 per ounce
by 2:17 p.m. EDT (1817 GMT). The metal earlier touched a high of
$1,352.65, its best since Aug. 19.
U.S. gold futures slipped 0.3 percent to end the
session at $1349.2 per ounce.
Gold prices soared in 2016 to touch a high of $1,374.91 an
ounce early in July after Britain's shock vote to leave the EU
created a heightened sense of uncertainty. But prices have since
eased, falling below the key $1,300 level early this month.
"The fact that recent weakness in the price has not
translated into a wave of selling - not yet at least - suggests
that the underlying investor sentiment towards gold remains
stable," Societe Generale analysts said in a note.
"The possibility of a further delay in the Fed's tightening
plans - along with expansionary policies and negative rates from
other major central banks - continue to generate favorable
sentiment towards gold."
The dollar index, which measures the greenback
against a basket of major currencies was 0.2 percent higher
while world stocks, which flourish in low interest rate
environments, jumped to the highest level in over a year.
"There is still some skepticism regarding the timing of rate
hike after the data," said Carsten Fritsch, an analyst at
"The likelihood for a hike in September dropped sharply and
the likelihood in December also dropped somewhat and hasn't
risen back to the level before U.S. data."
Holdings of SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, rose 1.52 percent, its biggest
one-day gain since July 5, to 952.14 tonnes on Tuesday from
937.89 tonnes on Friday.
Silver was down 1.3 percent at $19.77 per ounce after
touching a more than three-week high of $20.13.
Platinum fell about 1 percent to $1,084.99 per ounce
after hitting a two-week high of $1,105.80. Palladium was
down 1.1 percent at $687.60 after touching an over two-week high
(Additional reporting by Nallur Sethuraman in Bengaluru;
editing by David Clarke, G Crosse)