Gold fell on Thursday, its fourth consecutive daily drop, hit by strong U.S. factory data and a dollar rally after the European Central Bank chief said euro-zone interest rates will remain low for an extended period of time.
Some traders stayed on the sidelines ahead of Friday's important U.S. nonfarm payrolls data, which could shed more light on the Federal Reserve's planned tapering of monetary stimulus. Economists expect payrolls to rise by 184,000 in July, pushing the jobless rate near its lowest level in more than four years.
The metal, which is denominated in U.S. dollars, fell as the dollar index jumped 1 percent after ECB President Mario Draghi said the central bank expects key interest rates to remain at a record low 0.5 percent or lower levels for "an extended period of time."
On Thursday, the U.S. Federal Reserve ended a policy meeting without any sign that its $85 billion monthly bond-buying program would end soon. But strong economic data supported the view among investors that the Fed will start reducing stimulus later this year.
"It is a question of when, not if, with the Fed, and persistently strong numbers will only add more pressure on the Fed to act, at least to reduce the monthly purchases," Andrey Kryuchenkov, an analyst at VTB Capital said.
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Spot gold was down 0.8 percent at $1,311.50 an ounce. Bullion is now testing its 20-day moving average support at above $1,304, and will likely face overhead resistance at $1,326 near its 50-day average, analysts said.
U.S. gold futures for December delivery settled down $1.80 at $1,311.20, with trading volume about 25 percent below its 30-day average, preliminary Reuters data showed.
A more than one-percent gain in U.S. equities also weighed on gold's appeal as an investment hedge, with benchmark S&P 500 index rising to an all-time high above 1,700 for the first time ever.
Rising U.S. Treasury yield, seen as a gauge of U.S. short-term interest rates, also heavily pressured gold, analysts said.
Gold's 22 percent drop year to date is hurting the profitability of gold miners. The world's No. 1 gold producer Barrick Gold posted an $8.7 billion writedown and cut its dividend by 75 percent on falling gold price, while Kinross Gold reported a quarterly loss and suspended its semi-annual dividend altogether.
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ETF holdings steady
On a more positive note for gold, holdings of the world's largest bullion-backed exchange-traded fund, SPDR Gold Shares, were unchanged for a fifth day on Wednesday.
Gold ETFs have recorded outflows of nearly 600 tonnes of metal this year, helping push prices down more than 20 percent.
In top buyer India, gold imports have come to a halt due to uncertainty in import policy, keeping premiums high at around $45 an ounce over London prices, dealers said.