Gold prices fell on Thursday, pressured by a stronger dollar on rising expectations of a US rate hike in March following buoyant US economic data. Spot gold was down 0.7 percent at $1,240.66 per ounce by 1530 GMT. On Monday, the metal rose to $1,263.80, its highest since Nov. 11. US gold futures fell 0.7 percent to $1,241.30.
Gold took a hit after data on Thursday showed US jobless claims fell to a 44-year low. Labour tightness, combined with rising inflation, could encourage the Federal Reserve to raise interest rates at its March 14-15 policy meeting. "The short-term risk is probably skewed to the downside. The previous two occasions ahead of a Fed hike, we've seen gold weaken only to rally in the aftermath and that could potentially be seen once again," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
Fed Chair Janet Yellen and Vice Chairman Stanley Fischer will speak on Friday, likely providing further signals on the US central bank's policy path. Further weighing on gold were strong stock markets and dollar gains on the growing expectations of a US rate hike. A correction in gold, however, is likely to be shallow as investors remained friendly to bullion as a hedge against global uncertainty and rising inflation, analysts said.
"The market is also keeping an eye on geopolitical risks, which are not going away, and we have rising inflation in the US and Europe. We just had European inflation numbers rising to the highest in four years," Hansen added. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.28 percent to 843.54 tonnes on Wednesday from 841.17 tonnes on Tuesday.
ABN Amro lifted its year-end 2017 gold price forecast by $200 to $1,300 on Thursday, but said prices would likely consolidate until turning higher later in the year. "We think that the US dollar rally is behind us and this is a positive for gold prices. We are no longer expecting lower gold prices this year and see them stabilising in the near term and rallying later in the year and in 2018," said analyst Georgette Boele.
Among other precious metals, spot silver fell 0.4 percent to $18.33 an ounce. Platinum slipped 1.7 percent to $997.65 after touching a five-month high on Monday, while palladium dropped 0.2 percent to $773.50. "The current strength in (platinum group metals) prices doesn't appear to be justified by fundamentals. Indeed, growth in auto sales in China and the US slowed sharply in January," Chief Commodities Economist Caroline Bain at Capital Economics said in a note.
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