August 31, 2016 / 11:50 AM / 2 years ago

PRECIOUS-Gold eases to two-month low after U.S. jobs data

* Dollar at 3-week high after data, then turns lower
    * Focus now on August payrolls numbers on Friday
    * Graphic: 2016 asset returns reut.rs/1WAiOSC

 (Updates prices; adds comment, second byline, NEW YORK
dateline)
    By Marcy Nicholson and Jan Harvey
    NEW YORK/LONDON, Aug 31 (Reuters) - Gold slid to a two-month
low on Wednesday after forecast-beating U.S. jobs data stoked
speculation that the Federal Reserve would move ahead with plans
to raise interest rates, briefly propelling the dollar index to
its highest in three weeks.
    A payrolls processor showed U.S. private employers added
177,000 jobs in August, above economists' forecasts and
supporting expectations for Friday's closely watched U.S.
payrolls report to be strong. 
    An upbeat payrolls report would support the view that
further U.S. rate hikes may be on the cards, after Fed officials
sounded a hawkish note at a meeting last weekend. 
    Spot gold fell to $1,304.91 an ounce, its lowest
since June 24, the day after Britain voted to leave the European
Union. It was down 0.2 percent at $1,308.01 an ounce by 2:47
p.m. EDT (1847 GMT) after the dollar turned slightly
lower.
    The metal is heading for a 3.2 percent drop in August. U.S.
gold futures settled down 0.4 percent at $1,311.40.
    "If you looked at the last three or four days, you're
pricing in higher odds of a Fed rate increase. Odds are for
December and it seems like the market is getting behind that,"
said Rob Haworth, senior investment strategist for U.S. Bank
Wealth Management in Seattle.
    Gold is highly sensitive to rising U.S. interest rates,
which increase the opportunity cost of holding non-yielding
bullion. 
    Fed Chair Janet Yellen said on Friday the case for higher
rates was strengthening, while Vice Chair Stanley Fischer later
suggested an increase could come as soon as September.
  
    On Wednesday, Boston Fed President Eric Rosengren said the
Fed should consider that quicker interest rate rises over time
could stave off risks to the economy, while Chicago Fed
President Charles Evans said he is increasingly convinced that
U.S. economic growth has slowed permanently. 
 
    Technical selling, earlier strength in the U.S. dollar and
rate hike speculation have been behind gold's weakness,
Commerzbank analyst Carsten Fritsch said, adding that it was
nearing the psychologically key $1,300 level.
    "Nerves have become a bit fraught ahead of the September
FOMC meeting, given the latest comments from Janet Yellen," Saxo
Bank's head of commodities research Ole Hansen said. "The rising
dollar and U.S. real rates have also been creating headwinds.
    Silver was up 0.4 percent at $18.65 an ounce. 
    Platinum was down 0.3 percent at $1,048.80, after
touching an eight-week low of $1,043.20. Palladium was
down 0.9 percent at $671.60, after tapping a six-week low at
$665.97.

    
 (Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by Marguerita Choy and David Goodman)
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