Gold prices extended overnight losses in North American trade on Wednesday, sinking to a three-week low amid renewed expectations for a Federal Reserve interest rate hike later this year.
Gold for August delivery on the Comex division of the New York Mercantile Exchange fell by as much as 1.2% to touch a session low of $1,316.00 a troy ounce, a level not seen since June 30. It last stood at $1,318.70 by 12:38GMT, or 8:38AM ET, down $13.60, or 1.02%.
A recent string of upbeat economic reports, including June housing starts, retail sales, ISM manufacturing and employment were all much better than expected, suggesting that economic growth regained speed in the second quarter.
The bullish data could allow the Federal Reserve to raise interest rates later this year, but much will depend on policymakers' assessment of the impact on the U.S. economy of Britain's June 23 vote to leave the European Union.
Interest rate futures are currently pricing in a 47% chance of a rate hike by December, compared with less than 20% a week ago and up from 9% at the start of this month.
Gold is sensitive to moves in U.S. rates. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
The dollar climbed to a fresh four-month high early on Wednesday, boosted by Fed rate hike hopes.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.15% at 97.22, up from levels of around 96.00 just a week ago and the most since March 10.
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.