Gold prices moved in a narrow range on Thursday after upbeat US economic data and hawkish comments from Federal Reserve policymakers raised prospects of the central bank sticking to its tighter monetary policy, boosting the dollar. About half of the Fed's policymakers, including chairman Jerome Powell, used public appearances on Wednesday to show an increasingly unified view that the US economy was not headed for any obvious potholes.
Further supporting the dollar was data showing strength in the US job market, with service sector activity racing to a 21-year high in September. Spot gold was up 0.1 percent at $1,198.06 an ounce, as of 0711 GMT, after dropping 0.5 percent in the previous session. Prices hovered in a narrow range between $1,195.36 and $1,199.01 on Thursday. US gold futures dipped 0.1 percent to $1,201.9 an ounce.
"Gold remains heavy due to strong US economic data, which supports the emerging hawkish Fed narrative, underpinning the dollar sentiment," said Stephen Innes, APAC trading head at OANDA in Singapore. "Higher interest rates and a stronger US dollar are weighing on gold ... Some short positions in the market are supporting the metal," said Ronald Leung, chief dealer, Lee Cheong Gold Dealers, Hong Kong.
Gold prices have fallen for the past six months, losing over 12 percent, largely due to dollar strength, with the US currency benefiting from a vibrant US economy, rising US interest rates and fears of a global trade war. Investors are watching out for the US non-farm payrolls data due on Friday. Gold could dip towards the mid $1,180's in the event of a stronger non-farm payroll data, Innes said.
Meanwhile, the Italian government indicated it was open to trimming its budget deficit and debt, easing fears about fiscal policy in the euro zone's third-biggest economy, which dented safe haven buying interest for gold. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped 0.84 percent to 23,522,860.09 ounces on Wednesday, the lowest since February 2016.
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