Gold ends near $1,300, halts three-session slide

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Gold settled higher on Wednesday, after ending lower for three consecutive sessions, but it was still near four week lows on fears that the Federal Reserve could hike U.S. interest rates sooner than expected.

Fed Chair Janet Yellen said on Tuesday the U.S. central bank could raise rates earlier or faster if hiring and wages take off in an unexpected way, though she signaled that the Fed will keep monetary policy loose until jobs data shows the effects of the financial crisis are "completely gone."

U.S. gold futures for August delivery settled $2.70 higher at $1,299.80 an ounce.

Meanwhile, spot gold edged up to $1,297 an ounce, after losing 3.3 percent in the last two sessionsthe metal's biggest two-day loss since October. Traders said gold could have further to fall, especially as this week's $40 drop has failed to generate a robust pick-up in physical demand in Asia.

In China, the top consumer of gold, local premiums edged up to $1 an ounce on the Shanghai Gold Exchange from a small discount in the previous session.

Gold / US Dollar Spot

The bigger concern in the market is still about U.S. interest rates, with a hike likely to encourage investors to withdraw money from non-interest-bearing assets such as gold. Recent economic data from the United States, including that on jobs, has indicated that the economy is on a strong footing.

A strengthening U.S. economy and job market means the Fed should begin raising interest rates "relatively soon," Kansas City Federal Reserve Bank President Esther George said on Tuesday. George said by many measures, including a recent rise in rent and food prices, and strong hiring reports, the Fed should have already lifted interest rates from the zero level.

"Despite Yellen defending the Fed's stance to maintain loose monetary policies, the bullion markets seemed to interpret her comments for the possibility of an earlier than an anticipated rate hike as gold-bearish," HSBC analysts said in a note.

"With the break below $1,300/oz and technical weakness, further losses for gold are likely."

—By Reuters with CNBC. For more information on commodities, please click here.