LONDON: Gold slid to its lowest in two months on Thursday, extending losses to a fifth session as the dollar strengthened on indications from the U.S. Federal Reserve that it could raise interest rates sooner than expected.
Policymakers debated on whether interest rates should be raised earlier given a surprisingly strong jobs market recovery, minutes from the July meeting of the Fed's rate setting committee showed. Most officials, however, wanted further evidence before changing their view on when rates should be lifted.
Higher interest rates would dull the appeal of non-interest-bearing assets such as gold.
Spot gold fell as much as 1.2 percent to its lowest since June 19 at $1,276.90 an ounce. It was trading down 0.9 percent at $1,280.30 by 0952 GMT.
U.S. gold futures dropped as much as 1.6 percent to $1,274.90, also a two-month low.
"Gold was already on the defensive before the minutes as the tensions in Ukraine were easing and the market was paying less attention ... so you had other drivers like the dollar, which has been moving up since the start of the week," ABN Amro analyst Georgette Boele said.
"And then you had these dovish minutes which put extra pressure on gold and this is also ahead of tomorrow's speech by Yellen at Jackson Hole... The main topic should be employment and the way she sounds will be crucial."
The U.S. dollar traded just below 11-month highs against a basket of major currencies, buoyed by rising Treasury yields and the slightly hawkish tone in the U.S. central bank's minutes.
More data on Thursday on U.S. weekly jobless claims and eurozone and U.S. manufacturing data could trigger further sell-offs in gold.
Gold failed to gain support from a dip in global shares after a disappointing Chinese manufacturing survey stoked concern about the regional giant.
Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.9 tonne to 800.09 tonnes on Wednesday, the third straight daily increase.
Continued violence in Ukraine and the Middle East may be prompting investors to seek safety in gold. Although those conflicts have helped push bullion up around 7 percent this year, any impetus that they have provided has not lasted long, analysts said.
Silver fell 0.8 percent to $19.32 an ounce, having earlier touched a two-month low of $19.25.
Spot platinum was also trading at two-month lows of $1,415.20 an ounce, down for the ninth consecutive session in the longest losing streak since July 2008. Spot palladium , which hit a 13-1/2 year high of $900 earlier this week before falling back, rose 0.9 percent to $870 an ounce.
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