Gold prices fell on Wednesday, as US dollar and Treasury yields jumped after upbeat economic data boosted expectations that the Federal Reserve will continue to aggressively raise interest rates.
Spot gold was down 0.5% at $1,692.99 an ounce as of 0330 GMT, after earlier dropping to a one-week low.
US gold futures fell 0.6 percent to $1,703.30.
“The ISM services reading reminded investors that there is still some underlying momentum for this economy and that it kind of opens the door for the Fed to be more aggressive in fighting inflation,” said Edward Moya, chief analyst at OANDA.
“The move in Treasuries is somewhat concerning and could really keep pressure on gold.”
The US service industry rebounded again in August for the second month in a row amid stronger demand and employment growth.
The data boosted the US currency with the dollar index surging to a 20-year high, making gold more expensive for overseas buyers.
US 10-year Treasury yields rose to their highest level since June 16 on expectations that the Federal Reserve will continue to raise interest rates to tame high rates. Higher returns increase the opportunity cost of owning non-yielding gold.
The Federal Reserve is largely expected to introduce a 75 basis point rate increase on September 21. The US central bank has raised its benchmark interest rate by 225 basis points in total since March to combat spiraling inflation.
Indicative of sentiment, the holdings of the SPDR Gold Trust, the world’s largest gold-backed ETF, fell 0.21% to 971.05 tons on Tuesday from 973.08 tons on Friday.
Spot gold may test support at $1,685 an ounce, a break below that could open the way towards a $1,666-$1,673 range, according to Reuters technical analyst Wang Tao.
Spot silver fell 1.1 percent to $17.85 an ounce, platinum fell 1 percent to $844.43, and palladium fell 1 percent to $1,985.25.
(This story has not been edited by the NDTV crew and is automatically generated from a shared feed.)