NEW YORK/LONDON: Gold fell nearly 1 percent on Thursday for its fourth consecutive daily drop, hit by strong US factory data and a dollar rally after the European Central Bank chief said euro-zone interest rates will remain low for an extended period of time.
Some traders stayed on the sidelines ahead of Friday's important US nonfarm payrolls data, which could shed more light on the Federal Reserve's planned tapering of its monetary stimulus. Economists are expecting payrolls to rise by 184,000 positions in July, pushing the jobless rate to near its lowest level in more than four years.
The metal, which is denominated in US dollars, fell as the dollar index jumped 1 percent after ECB President Mario Draghi said that the central bank expects key interest rates to remain at a record low 0.5 percent or lower levels for "an extended period of time."
Draghi's comments came a day after the US central bank ended a policy meeting without any sign that its bond-buying program would end soon, as the US economic recovery still needs support.
On Thursday, government data showing US factory activity jumped to a two-year high in July and jobless claims hit a 5-1/2-year low last week. The burst of strength in the economy as the third quarter started keeps on track expectations that the Fed will start reducing its monetary stimulus later this year.
"It is a question of when, not if, with the Fed, and persistently strong numbers will only add more pressure on the Fed to act, at least to reduce the monthly purchases," Andrey Kryuchenkov, an analyst at VTB Capital said.
Spot gold was down 0.8 percent at $1,312.26 an ounce by 1:56 p.m. EDT (1756 GMT).
US gold futures for December delivery settled down $1.80 at $1,311.20, with trading volume on track to finish below its 30-day average, preliminary Reuters data showed.
A more than one-percent gain in US equities also weighed on gold's appeal as an investment hedge, with benchmark S&P 500 index rising to an all-time high above 1,700 for the first time ever.
Rising US Treasury yield, seen as a gauge of US short-term interest rates, also heavily pressured gold, analysts said.
ETF HOLDINGS STEADY
On a more positive note for gold, holdings of the world's largest bullion-backed exchange-traded fund, SPDR Gold Shares , were unchanged for a fifth day on Wednesday.
"If the ETF outflows were to come to an end, one key factor weighing on the gold price would be eliminated," Commerzbank analysts said in a note.
Gold ETFs have recorded outflows of nearly 600 tonnes of metal this year, helping push prices down more than 20 percent.
In top buyer India, gold imports have come to a halt due to uncertainty in import policy, keeping premiums high at around $45 an ounce over London prices.
Among other precious metals, silver was down 0.7 percent at $19.67 an ounce. Platinum gained 0.2 percent to $1,436.74 an ounce, while palladium climbed 0.5 percent to $729.72 an ounce.
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