Gold eases towards 4-month low as US rate rise looms

Gold slipped towards the previous day's four-month low on Thursday as the Federal Reserve's reiteration that US interest rates were likely to rise this year pushed the dollar index to a six-week high.

A rally in European shares after the Greek parliament passed the austerity measures demanded by its lenders to open talks on a multi-billion euro bailout also diverted some attention from gold.

Spot gold was down 0.3 per cent at $1,146.00 an ounce at 0930 GMT, while US gold futures for August delivery were down $2.70 an ounce at $1,144.70.

Spot prices fell to their lowest since mid-March on Tuesday at $1,143.43 after Federal Reserve chair Janet Yellen confirmed in a statement that the Fed will likely hike interest rates later this year if the US economy expands as expected.

Gold is sensitive to rising rates, which lift the opportunity cost of holding non-yielding bullion, while benefiting the dollar.

"Wednesday's comments from Fed Chair Yellen, citing the likelihood of a 2015 rate rise, helped prop up the dollar and led to a slide in gold which retraced to its year-to-date lows," Mitsubishi analyst Jonathan Butler said.

"Gold is now trading below the long-term basing uptrend made up of the November and March lows, with further downside in prospect if the dollar gains further, or Treasury yields rise." The Fed has indicated that the timing of a rate rise will depend on economic data. There was more evidence on Wednesday of growth improving, with industrial production rebounding last month and factory activity in New York state picking up in July.

The dollar hit a six-week high versus a basket of currencies as fading concerns over Greece shifted the focus back to the outlook for yield differentials in different economies.

Premiums for physical gold on the Shanghai Gold Exchange picked up slightly to $2-$4 an ounce over spot, although analysts say a slowing economy could cap demand from China, the world's top gold consumer.

"While gold remains out of favour among investors, the potential return of Chinese buyers seeking an alternative to equities and real estate remains the key bullish wild card," Julius Baer said in a note. "However, the Shanghai Gold Exchange shows no pick-up in demand yet."

Among other precious metals, silver was down 0.6 percent at $15.00 an ounce, while platinum was down one per cent at $1,011 an ounce and palladium fell 0.1 per cent to $637 an ounce.

Platinum earlier slid to its lowest since February 2009 at $1,001.75 an ounce. Top producer Anglo American Platinum said on Thursday its equivalent refined production of the metal rose 60 percent in the second quarter.