NEW YORK/LONDON (Reuters) - Gold prices increased on Tuesday as the dollar retreated slightly from close to a six-month high even as strong U.S. economic data sealed the case for the U.S. Federal Reserve to increase interest rates.
U.S. services sector activity accelerated in May, pointing to robust economic growth in the second quarter.Other data showed job openings rising to a record high in April, far outpacing hiring.
The Institute for Supply Management’s non-manufacturing activity index jumped 1.8 points to 58.6, ending three straight monthly declines. The reading indicates expansion in the sector, which accounts for more than two-thirds of U.S. economic activity.
Strong growth and tightening labor market conditions should guarantee that the Fed will hike interest rates next week, and boosts chances for two more hikes later in the year.
Still, the U.S. dollar, in which gold is priced, declined against a basket of currencies, making gold more attractive to investors.
Spot gold gained 0.5 percent at $1,298.45 per ounce by 1:32 p.m. EDT (1732 GMT).
U.S. gold futures for August delivery settled up $4.90, or 0.4 percent, at $1,302.20 per ounce.
“The dollar could not find support from the data because it had been in a strong uptrend recently in anticipation of improving data and speculators are taking profit on those long dollar positions ahead of the Fed meeting next week,” said Forex.com’s Fawad Razaqzada.
“What really matters is how (the data) will impact the thinking and action of the Fed. Most people are therefore waiting to hear from the central bank itself with the decision now in just over a week.”
Expectations of higher interest rates tend to boost the dollar and reduce investor interest in non-yielding bullion.
U.S. stocks rose to a record intra-day high, spurred by a new all-time peak for Apple, a 17-year top for European tech firms and news that Twitter was set to join Wall Street’s flagship S&P 500 index.
Rising equities typically signal strong investor risk appetite, weighing on gold, seen as a safe haven asset.
Meanwhile, silver rose 1 percent at $16.52 an ounce.
Platinum lost 0.5 percent at $896.25 an ounce. It earlier hit a low of $888, the lowest since May 21.
Palladium dropped 0.1 percent at $992 per ounce after hitting a six-week high of $1,010.50 the previous session.
Additional reporting by Karen Rodrigues and Swati Verma in Bengaluru; editing by Alexander Smith and David Gregorio