Investing.com - Gold futures moved further away from a 16-month peak in European trade on Wednesday, as the U.S. dollar staged a recovery after a pair of Federal Reserve officials talked up U.S. interest rate hikes this year.
Gold for June delivery on the Comex division of the New York Mercantile Exchange fell to an intraday low of $1,280.50 a troy ounce before trimming losses to $1,282.85 by 06:53GMT, or 02:53AM ET, down $8.95, or 0.69%.
Gold rallied to $1,306.00 earlier this week, a level not seen since January 2015, as a broadly weaker U.S. dollar boosted the appeal of the precious metal.
The dollar bounced back against a basket of six major currencies on Wednesday, climbing to a high of 93.23, after crashing to a low of 91.89 at one point on Tuesday, its weakest level since January 2015. It last stood at 93.11, up 0.1% for the day.
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 greenback’s gains came after Atlanta Fed President Dennis Lockhart said the U.S. could see two further interest rate rises this year, while San Francisco Fed President John Williams said that he would support an interest-rate hike in June as long as he sees continued progress on the economy, inflation and jobs.
Gold is sensitive to moves in U.S. interest rates, as a rise would lift the opportunity cost of holding non-yielding assets such as bullion.
Investors looked ahead to key U.S. data later in the day to gauge if the world's largest economy is strong enough to withstand further rate hikes this year.
The U.S. was to release the ADP jobs report for April at 12:15GMT, or 8:15AM ET, followed by the Institute of Supply Management’s report on service sector growth for April at 14:00GMT, or 10:00AM ET.
Market players are also focusing on Friday's U.S. nonfarm payrolls report. The consensus forecast is that the data will show jobs growth of 200,000 last month, following an increase of 215,000 in March, the unemployment rate is forecast to hold steady at 5.0%, while average hourly earnings are expected to rise 0.3% after gaining 0.3% a month earlier.
An upbeat employment report would help support the case for the Federal Reserve to gradually tighten monetary policy this year.
Prices of the yellow metal are up nearly 21% so far this year as expectations faded that the Fed would move to normalize interest rates due to fears over a global economic slowdown.
A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
Elsewhere on the Comex, silver futures for May delivery shed 16.4 cents, or 0.94%, to trade at $17.31 a troy ounce during morning hours in London, while copper futures declined 1.2 cents, or 0.54%, to $2.207 a pound.