Gold prices struggled to pull away from a 5-1/2-year low on Thursday after more upbeat US economic data bolstered prospects that the Federal Reserve could lift interest rates as soon as next month.
A surge in US services industry activity to a near-decade high suggested solid economic momentum that strengthens the case for a US interest rate hike this year, the first since 2006.
Investors will be eyeing US nonfarm payrolls data due on Friday, with economists polled by Reuters predicting employment in July to have increased at the same pace as June’s 223,000 rise.
“If it’s in excess of 250,000, I think that will seal the deal for a September rate hike,” said Howie Lee, analyst at Phillip Futures in Singapore.
A strong US employment report could send gold below $1,080, he said.
“(That) appears to be a level that many traders have put their stop-loss in because every time it breaches that level there’s a swift decline,” said Lee, adding bullion could fall as low as $1,060.
Spot gold was flat at $1,084.71 an ounce by 0213 GMT. The metal has been stuck below $1,100 since breaching that support level after a deep rout in late July that pushed it as far as $1,077, its weakest since February 2010.
US gold for December delivery slipped 0.1 percent to $1,084.10 an ounce.
Expectations that the Fed could increase rates at its next policy meeting in September grew louder this week after Atlanta Federal Reserve President Dennis Lockhart said only a “significant deterioration” in the US economy would make him not support a rate hike next month.
But Fed Governor Jerome Powell said policymakers had not yet decided whether to raise interest rates next month, adding more recent employment data had been mixed.
A looming hike in US interest rates dims the appeal of non-interest yielding gold, instead pulling more funds to the dollar which on Wednesday hit its highest since April versus a basket of currencies.
The decline in holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, continued on Wednesday, to 21.47 million ounces, the lowest since September 2008.
In other metals, spot palladium gained 0.5 percent to $594 an ounce and platinum rose 0.3 percent to $950.50, both still near multi-year lows reached earlier this week. Silver was little changed at $14.55 an ounce.