Investing.com - Gold prices added to overnight losses in European trade on Thursday, falling to a new three-week low amid renewed expectations for a Federal Reserve rate hike later this year.
Gold for August delivery on the Comex division of the New York Mercantile Exchange fell to a session low of $1,310.70 a troy ounce, a level not seen since June 24. It was last at $1,317.05 by 06:49GMT, or 2:49AM ET, down $2.25, or 0.17%.
A day earlier, prices lost $13.00, or 0.98%, as investors looked to buy into rising equity markets rather than purchasing safe-haven assets.
A recent string of upbeat economic reports, including June housing starts, retail sales, ISM manufacturing and employment were all better than expected, suggesting that economic growth regained speed in the second quarter.
The bullish data could allow the Federal Reserve to raise interest rates much sooner than previously expected. Interest rate futures are currently pricing in a 19% chance of a rate hike by September. December odds were at 51%, compared with less than 20% a week ago and up from 9% at the start of this month.
Gold is sensitive to moves in U.S. rates. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose to a four-month high of 97.37 on Wednesday, boosted by Fed rate hike speculation. It traded at 97.00 early Thursday, up from levels of around 96.00 just a week ago.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
The yellow metal remained supported amid speculation central banks around the world will step up monetary stimulus in the next few months to counteract the negative economic shock from the Brexit vote.
Market players looked ahead to the outcome of Thursday’s European Central Bank meeting. The consensus is that the ECB will leave interest rates on hold, while President Mario Draghi is expected to hint at further stimulus as soon as September to offset the hit to the economy from Britain's decision to leave the European Union.
Traders are also focusing on whether the Bank of Japan will expand its monetary stimulus at its policy meeting later this month. The yen has been pressured by expectations that a double-bazooka of fiscal and monetary easing was on the cards in the weeks ahead.
Investors are also wagering on a rate cut from the Bank of England in August.
The precious metal is up almost 25% for the year to date, boosted by concerns over global growth and expectations of monetary stimulus.