Gold fell to its lowest in three weeks on Wednesday on higher equities and as the dollar hit a four-month high following strong U.S. economic data, which raised expectations that the Federal Reserve may raise rates before the end of the year.
The dollar hit its highest for four months, still benefiting from data on Tuesday showing U.S. housing starts surged more than expected in June, underpinning a theme of strength in the U.S. economy.
"As the probability of a Fed rate hike by the end of the year has now increased, speculators are taking profits after the good rally we have seen in gold in early July," Commerzbank analyst Daniel Briesemann said.
The metal was also dragged lower by advancing European and U.S. equities, which increased investor appetite for risk.
"There is a return in risk sentiment across the market in general right now, as you have more monetary stimulus packages from central banks," Mitsubishi Corp analyst Jonathan Butler said.
"Although more stimulus would also favour no-yielding gold, when there's pro-risk trading, there's also a retreat of some of those safe-haven elements that have supported the metal."
Traders are waiting for the release of the weekly jobless claims report, Philadelphia Fed Business Outlook Survey, and existing home sales report on Thursday, along with the PMI Manufacturing Index Flash on Friday.
Reference: Reuters, Xinhua
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