Gold prices fell on Thursday, pressured by a stronger dollar on rising expectations of a US rate hike in March amid buoyant US economic data. Spot gold was down 0.8 percent at $1,239.47 per ounce by 1345 GMT. On Monday, the metal rose to $1,263.80, its highest since November 11. US gold futures fell 0.8 percent to $1,239.90. Gold took a hit after data on Thursday showed US jobless claims fell to a 44-year low. Labour tightness, combined with rising inflation, could encourage the Federal Reserve to raise interest rates at its March 14-15 policy meeting.
"The short-term risk is probably skewed to the downside. The previous two occasions ahead of a Fed hike, we've seen gold weaken only to rally in the aftermath and that could potentially be seen once again," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
Fed Chair Janet Yellen and Vice Chairman Stanley Fischer will speak on Friday, likely providing further signals on the US central bank's policy path. A correction in gold, however, is likely to be shallow as investors remained friendly to bullion as a hedge against global uncertainty and rising inflation. "The market is also keeping an eye on geopolitical risks, which are not going away, and we have rising inflation in the US and Europe. We just had European inflation numbers rising to the highest in four years," Hansen added.
US inflation recorded its biggest monthly increase in four years on Wednesday and euro zone inflation surged to 2.0 percent last month, data showed on Thursday. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.28 percent to 843.54 tonnes on Wednesday from 841.17 tonnes on Tuesday. Spot silver fell 0.6 percent to $18.30 an ounce. Platinum slipped 1.4 percent to $1,000.49 after touching a five-month high on Monday, while palladium dropped 0.6 percent to $770.97.
"The current strength in (platinum group metals) prices doesn't appear to be justified by fundamentals. Indeed, growth in auto sales in China and the US slowed sharply in January," Chief Commodities Economist Caroline Bain at Capital Economics said in a note. "With China having reduced the tax relief on small vehicles this year, we think that auto sales there could slow further."
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