Investing.com - Gold prices slipped towards a five-and-a-half year low on Wednesday, as market players looked ahead to the release of key U.S. data later in the session, amid ongoing expectations for a September rate hike.
Gold futures for December delivery on the Comex division of the New York Mercantile Exchange dipped $3.80, or 0.35%, to trade at $1,086.90 a troy ounce during European morning hours after hitting a session low of $1,083.90 overnight.
A day earlier, gold inched up $1.30, or 0.12%, to close at $1,090.70. Futures fell to a five-and-a-half year low of $1,072.30 on July 24. Gold prices lost $79.50, or 6.72%, in July, the biggest monthly decline since June 2013.
Later in the day, the U.S. was to release the ADP jobs report for July, while the ISM was to report on service sector activity. Market players were also waiting for Friday's U.S. nonfarm payrolls report.
The consensus forecast is that the report will show jobs growth of 223,000 last month. Monthly jobs gains above 200,000 are seen by economists as consistent with strong employment growth.
Gold has been under heavy selling pressure in recent months amid speculation the Federal Reserve will raise interest rates for the first time in nine years as soon as September.
Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.
Atlanta Federal Reserve Bank President Dennis Lockhart, in an interview with the Wall Street Journal, said the Fed was "close" to being ready to raise short-term rates. Lockhart added that it would take "significant deterioration" in the U.S. economy for him to not support a rate hike in September.
Lockhart, a voter this year, is deemed somewhat as a moderate, analysts said, which made his remarks more meaningful.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 98.20 early on Wednesday, the highest level since April 23.
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 has been boosted recently by expectations that the improving U.S. economy will prompt the Federal Reserve to raise short term interest rates as early as September.
Also on the Comex, silver futures for September delivery shed 5.2 cents, or 0.36%, to trade at $14.50 a troy ounce.
Elsewhere in metals trading, copper for September delivery declined 1.5 cents, or 0.63%, to trade at $2.347 a pound during morning hours in London, despite data showing that activity in China's services sector grew at its fastest pace in 11 months in July.
The Caixin/Markit services purchasing managers' index rose to 53.8 last month from June's reading of 51.8, hitting the highest level since August 2014.
Copper tumbled to a six-year low of $2.321 earlier in the week, following the release of disappointing Chinese manufacturing activity data.
The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.