* Strong U.S. data stokes speculation of interest rate hike
* Dollar index near two-week highs
* Palladium prices hit highest since Jan. 2001
(Updates prices, adds comment)
By Clara Denina
LONDON, July 7 Gold fell on Monday as the dollar
firmed on speculation of an earlier-than-expected hike in U.S.
interest rates following strong jobs data, which dented
investment demand for the metal.
Gold has been under pressure since data on Thursday showed
U.S. employment growth jumped in June and the jobless rate
closed in on a six-year low, evidence of brisk economic growth.
The numbers led investors to bring forward their views on
timing of the first rate hike by the U.S. Federal Reserve to the
middle of 2015, although most economists said that more data was
An interest rate rise would encourage investors to withdraw
money from non-interest-bearing assets such as gold.
Spot gold slipped 0.5 percent to $1,313.40 an ounce
by 1349 GMT, while U.S. gold futures for August delivery
were down 0.5 percent at $1,314.30 an ounce.
The dollar was up for a fifth straight day to trade near its
highest in almost two weeks against a basket of currencies. It
gained support from the steady climb in U.S. bond yields
since last week's robust U.S. jobs report.
"The stronger U.S. dollar triggered some light stops this
morning," Afshin Nabavi, head of trading at MKS, said. "The
market will be awaiting the (Fed meeting) this Wednesday to see
where the dollar is heading for."
"(We're seeing) the good jobs data (being weighed) against
the major problems in the Middle East," he said. "That's why I
think the FOMC this week ought to be more important than the
ones in the past."
Returns from U.S. bonds are closely watched by the gold
market, given that the metal pays no interest, as these are
viewed as a key indicator of Fed action in the coming months,
Speculators raised net long positions in gold by 22,573
contracts to 136,929 in the week to July 1, data from the
Commodity Futures Trading Commission showed on Friday.
Physical demand showed some sign of improvement after
remaining subdued for months, while selling of recycled gold
increased as prices moved above $1,300 an ounce, traders said.
"This is likely to cap the upside for the time being, while
investor bargain hunting is expected to lend ongoing support to
the metal between $1,300 and $1,310," German refiner Heraeus
Among other precious metals, silver fell 1.3 percent
to $20.85 an ounce, while platinum was up 0.4 percent to
$1,497 an ounce.
Palladium rose 0.4 percent to $862.967, having
earlier reached a fresh 13-year high of $867 an ounce on strong
demand from the auto industry, which uses the metal in catalytic
converters in vehicle engines.
Palladium had a boost from last week's data showing that
U.S. auto sales hit an eight-year high in June and from
continued supply worries from major producer South Africa.
South Africa's Impala Platinum said on Monday workers were
continuing a wildcat strike over wages at its Marula mine.
Around 2,000 workers affiliated with the National Union of
Mineworkers (NUM) downed tools at the mine on Friday, demanding
higher wages. "The work stoppage is still continuing today,"
Implats spokesman Johan Theron said.
(Additional reporting by Jan Harvey in London and A.
Ananthalakshmi in Singapore; editing by Jane Baird and David