Gold edged lower on Monday, after falling by the most in two years in July, as the dollar steadied and investors monitored US economic indicators for clues on the timing of a hike in US interest rates. Spot gold was down 0.3 percent at $1,091.90 an ounce by 1347 GMT. The metal hit a low of $1,077 on July 24, its weakest in 5-1/2 years.
It lost almost 7 percent in July, its steepest monthly drop since June 2013, and fell for a sixth straight week last week, its longest retreat since 1999. US gold for December delivery was down 0.4 percent at $1,091.20 an ounce. Gold's rout deepened last month as the dollar strengthened after comments by the Federal Reserve signalled it was on course to raise interest rates for the first time in nine years.
"The dollar is back on the ascendant today, weighing on all commodity prices," Mitsubishi Corp analyst Jonathan Butler said. "US economic data is the main focus right now, culminating with the nonfarm payrolls number later this week." The dollar was up 0.1 percent against a basket of leading currencies, cutting some gains after data showing US consumer spending in June recorded its smallest gain in four months. Separately, the pace of growth in the US manufacturing sector slowed in July.
Investors have been keeping a sharp eye on economic data as this could influence the timing of the first rate increase in nearly a decade. The US Federal Reserve has said it will hike rates only when it sees a sustained recovery in the economy. Nonfarm payrolls on Friday will be closely watched. A rate hike, which could come as early as September, would put further pressure on non-interest yielding gold and increase the opportunity cost of holding it.
Hedge funds and money managers kept their first bearish stance in COMEX gold in at least a decade during the week ended July 28, suggesting the recent mass exodus from bullion was more than a knee-jerk reaction. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped to the lowest since September 2008 at 21.63 million ounces on Friday. Billionaire hedge fund manager John Paulson, one of the world's most influential gold investors, said on Friday that the metal is now at an appropriate price level. Paulson holds a 10 million share stake, now worth about $1 billion, in the SPDR Gold Trust fund. Spot silver eased 0.5 percent to $14.69 an ounce. Spot platinum dropped 1.1 percent to $970.99 an ounce, after posting the biggest monthly fall in ten months at 8.7 percent in July. Palladium gained 1.7 percent to $619.25 an ounce.