Gold fell for the eighth straight session on Thursday, slipping to a four-month low, pressured by a stronger dollar after U.S. weekly jobless claims fell and ahead of key data that could put the Federal Reserve on track to raise interest rates this year.
Initial claims for state unemployment benefits unexpectedly declined by 5,000 to a seasonally adjusted 249,000 for the week to Oct. 1. The U.S. dollar rose to the highest in more than two months against a basket of currencies as the data reinforced the view that the Fed would raise rates at the end of the year.
Spot gold fell 1.1 percent at $1,251.64 an ounce years on Tuesday and touched its lowest since June 24 at $1,261.59 in the previous session after forecast-beating U.S. manufacturing data and comments from Fed officials that there was a strong case for raising rates.
The most active U.S. gold futures for December delivery settled down 1.2 percent at $1,253 per ounce.
According to Kensho, gold has traded lower 57 percent of the time the British FTSE 100 has traded higher and the pound has fallen against the dollar.
Gold's losses dragged the rest of the complex lower. Spot silver fell 2.4 percent to $17.27 an ounce, after falling to $17.08, the lowest since June 22. Platinum was down 1.5 percent at $961.25, the lowest since June 24, while palladium was down 1.6 percent at $665.60, a 3-week low. The yellow metal registered its biggest daily drop in three years on Tuesday and extended losses in the previous session after forecast-beating U.S. manufacturing data and comments from Fed officials saying there was a strong case for raising rates.
"Strong U.S. data and speeches of FOMC members that the Fed might raise rates before the year is out and then rumors about the ECB tapering its stimulus ... indicate more downside pressure in the short term as speculators keep liquidating long positions," Commerzbank analyst Daniel Briesemann said.
Markets will now focus on Friday's U.S. non-farm payrolls report, which is expected to show 175,000 jobs added, according to the median estimate of 100 economists polled by Reuters.
"A surprise on the upside (of the labor numbers) will make market watchers expect an even higher probability of a rate hike, and that could bring gold prices down," OCBC Bank analyst Barnabas Gan said. Other data this week showed that U.S. services sector activity rebounded to an 11-month high in September, prompting traders to price in close to a 65 percent chance of an interest rate increase in December.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced.
"This week, dollar strength materialized on the back of Brexit comments, hawkish Fed news, and ECB headlines, pushing gold down; a subsequent wall of technical selling exacerbated the fall," said RBC Capital Markets in a note, adding that this began to tear down the wall of investor positioning that built up this year.
"Overall, we are still generally bearish on gold as into 2017 we see next year as unable to repeat the perfect storm for gold that occurred in (the first half of) 2016."
Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.
-- CNBC staff contributed to this report.