By Renita D. Young
NEW YORK (Reuters) - Confidence that the U.S. economy is still relatively strong kept investors away from gold as a safe haven during this week's wild stock market ride.
Gold failed to attract investors fleeing from the biggest selloff in six years in global equities as U.S. Treasury yields rose to four-year highs.
Bullion was headed for a 1 percent weekly decline, having fallen to a one-month low of $1,306.81 on Thursday.
Signals from the U.S. Federal Reserve, unexpectedly low U.S. unemployment figures and other data showing the country's economy was robust drove investors to expect more U.S. interest rate hikes.
Higher interest rates make gold less attractive to investors as a safe haven because it does not pay interest.
"A safe haven is not necessarily something that soars when other markets fall," said George Milling-Stanley, vice president and head of gold strategy at State Street Global Advisors.
"Rather than sell their equities, investors sold gold to meet their margin calls," he added.
Investors treated the dollar as a safe haven instead.
The global market selloff, sparked by last Friday's jump in Treasury yields, and bets that the United States could see at least three interest rate hikes in 2018 due to improving U.S. fundamentals have propelled the U.S. dollar in recent days.
A stronger dollar makes dollar-denominated bullion more expensive for users of other currencies.
"Investors are caught in a rush to cash and gold is not on their radar now," said George Gero, managing director of RBC Wealth Management.
It painted a picture of a still-healthy U.S. economy, several traders have said.
"They felt the economy was still strong and able to rebound. However some of them held onto their (gold) positions in case there was a deeper stock market correction," said Miguel Perez-Santalla vice president of Heraeus Precious Metals.
The benchmark S&P 500 and the Dow industrials confirmed they were in correction territory later on Thursday, both falling more than 10 percent from their Jan. 26 record highs.
Gold prices are expected to remain pressured short-term, according to Suki Cooper, precious metals analyst at Standard Chartered bank (LON:STAN).
"We continue to expect prices to remain under pressure in Q1-2018 and forecast prices to average $1,300 per ounce during the quarter, if equity markets endure further downside risk, gold is likely to be called upon as a liquid asset before it benefits from a flight to safety," Cooper said.