Fed taper bets knock gold in run-up to US jobs data

Gold fell to test the pivotal $1,800 support level on Thursday, a day before the release of the monthly US jobs report, as a key Federal Reserve official's hawkish comments reinforced bets for early tapering of the central bank's bond-buying program.

Spot gold was down 0.6% to $1,801.51 per ounce by 10:04 a.m. EDT (1404 GMT), while US gold futures shed 0.6% to $1,803.30.

Gold prices jumped more than 1% on Wednesday on weaker-than-expected US ADP jobs data, but were quick to give up those gains after Fed Vice Chair Richard Clarida suggested the central bank could begin tapering its asset purchases later this year.

"Gold is trading weak relative to real yields, suggesting the metal's micro-structure is vulnerable to a downside catalyst and we're expecting a strong beat to Friday's jobs data, so there could be some further momentum to the downside," said TD Securities commodity strategist Daniel Ghali.

Gold edges higher as investors strap in for US jobs data

The release on Friday of the US nonfarm payrolls report for July could shape the Fed's policy outlook, with economists in a Reuters poll predicting a gain of 870,000 jobs.

Higher interest rates raise the opportunity cost of holding non-interest bearing gold.

OANDA analyst Craig Erlam also said in a note that recent comments from various Fed officials gives the impression that the balance of power is falling in favor of the hawks, which a potentially strong jobs report would only accelerate, and that does not bode well for gold.

Investors also took note of the Bank of England's decision to leave interest rates and its bond-buying program on hold.

Asia gold: Price rise dulls retail demand in most Asian centres

On the physical front, India's gold imports in July more than doubled from a year earlier to their highest level in three months as demand improved after states lifted lockdown restrictions, according to a government source.

Elsewhere, silver dropped 0.6% to $25.20 per ounce. Platinum fell 1.7%, to $1,007.96 and palladium rose 0.1% to $2,648.51.