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Gold drops to 2-month low

Thursday, August 21 08:15:13

Gold extended losses to a fifth session on Thursday, sliding 1 percent to its lowest in two months, after the U.S. dollar strengthened on indications from the Federal Reserve that it could raise interest rates sooner than expected.

A surprisingly strong recovery in the U.S. job market could lead the Fed to raise interest rates earlier than it had been anticipating, minutes from the Fed's July meeting showed, although most officials wanted further evidence before changing their view.

Spot gold fell as much as 1.2 percent to $1,276.90 an ounce, its lowest since June 19, before recovering slightly by 0635 GMT to trade down 0.9 percent at $1,280.04. U.S. gold dropped as much as 1.6 percent to $1,274.90, also a two-month low. Safe-haven gold failed to gain support despite a dip in Asian shares that came under pressure as a disappointing Chinese manufacturing survey stoked concern about the regional giant. The U.S. dollar traded at 11-month highs against a basket of major currencies because of 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. Investors fear that strong data could prompt the Fed to increase rates soon. Higher interest rates would dull the appeal of non-interest-bearing assets such as gold. Markets are also eyeing Fed chair Janet Yellen's comments at the Jackson Hole central bankers' gathering on Friday.

Meanwhile, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings 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. Those conflicts have helped push bullion up around 7 percent this year. (Reuters)

For more visit: www.businessworld.ie