NEW YORK/LONDON (Reuters) - Gold fell for the eighth straight session on Thursday, slipping to a four-month low, pressured by a stronger dollar after U.S. weekly jobless claims fell and ahead of key data that could put the Federal Reserve on track to raise interest rates this year.
Initial claims for state unemployment benefits unexpectedly declined by 5,000 to a seasonally adjusted 249,000 for the week to Oct. 1. The U.S. dollar .DXY rose to the highest in more than two months against a basket of currencies as the data reinforced the view that the Fed would raise rates at the end of the year.[USD/]
Spot gold XAU= fell to $1,250.35 an ounce, its lowest since June 8 after extending losses below the 200-day moving average. By 2 p.m. (1800 GMT) it was down 1.2 percent at $1,251.17.
The most active U.S. gold GCcv1 futures for December delivery settled down 1.2 percent at $1,253 per ounce.
Gold’s losses dragged the rest of the complex lower. Spot silver XAG= fell 2.4 percent to $17.27 an ounce, after falling to $17.08, the lowest since June 22. Platinum XPT= was down 1.5 percent at $961.25, the lowest since June 24, while palladium XPD= was down 1.6 percent at $665.60, a 3-week low.
The yellow metal registered its biggest daily drop in three years on Tuesday and extended losses in the previous session after forecast-beating U.S. manufacturing data and comments from Fed officials saying there was a strong case for raising rates.
“Strong U.S. data and speeches of FOMC members that the Fed might raise rates before the year is out and then rumours about the ECB tapering its stimulus ... indicate more downside pressure in the short term as speculators keep liquidating long positions,” Commerzbank analyst Daniel Briesemann said.
Markets will now focus on Friday’s U.S. non-farm payrolls report, which is expected to show 175,000 jobs added, according to the median estimate of 100 economists polled by Reuters.
“A surprise on the upside (of the labour numbers) will make market watchers expect an even higher probability of a rate hike, and that could bring gold prices down,” OCBC Bank analyst Barnabas Gan said.
Other data this week showed that U.S. services sector activity rebounded to an 11-month high in September, prompting traders to price in close to a 65 percent chance of an interest rate increase in December.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced.
“This week, dollar strength materialized on the back of Brexit comments, hawkish Fed news, and ECB headlines, pushing gold down; a subsequent wall of technical selling exacerbated the fall,” said RBC Capital Markets in a note, adding that this began to tear down the wall of investor positioning that built up this year.
“Overall, we are still generally bearish on gold as into 2017 we see next year as unable to repeat the perfect storm for gold that occurred in (the first half of) 2016.”
Additional reporting by Swati Verma in Bengaluru; Editing by David Evans and Chizu Nomiyama