Gold drops to $1,080 on September rate hike fears, U.S. GDP eyed

Investing.com – Gold prices fell sharply on Thursday, after the Federal Reserve left the door open for a rate hike as soon as September following its upbeat assessment of the economy.

for December delivery on the Comex division of the New York Mercantile Exchange hit an intraday low of $1,081.50 a troy ounce before trading at $1,084.00 during European morning hours, down $9.30, or 0.85%.

A day earlier, gold dipped $3.40, or 0.31%, to close at $1,093.30. Futures fell to a five-and-a-half year low of $1,072.30 on July 24.

Also on the Comex, for September delivery shed 13.3 cents, or 0.9%, to trade at $14.61 a troy ounce.

The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.26% to 97.48 early on Thursday, improving from 97.08 by close of trade on Wednesday.

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.

The greenback was boosted after the Fed described the economy as expanding “moderately,” while upgrading its view of the labor and housing markets.

The central bank gave no clear indication of the timing of the next rate hike, but left itself room to act as early as September, citing “solid” gains in the job market and “additional” improvement in the housing sector.

The U.S. was to release figures on later in the day, which were expected to show that the economy rebounded 2.6%, following a 0.2% contraction in the first quarter after an unusually harsh winter.

Gold has been under heavy selling pressure in recent months amid speculation the Fed will hikes rates for the first time in nine years this autumn.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

Elsewhere in metals trading, for September delivery inched down 1.0 cent, or 0.4%, to trade at $2.398 a pound during morning hours in London. Prices fell to a six-year low of $2.336 on Monday.

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