Gold dips after nearing seven-week highs, U.S. jobs data awaited

By Maytaal Angel

LONDON (Reuters) - Gold fell on Thursday after nearing a seven-week high in the previous session as investors squared positions ahead of U.S. jobs data which should give further clues on the outlook for interest rate rises.

Gold has rallied through most of July as the dollar fell on reduced expectations for a U.S. rate increase this year.

U.S. inflation has been contained even as the labour market appears to be in its best shape in many years, with the jobless rate staying near a 17-year low and double-digit U.S. earnings growth in the second quarter.

A slower pace of rate hikes tends to boost gold by lowering the opportunity cost of holding non-yielding bullion and by weighing on the dollar, making dollar-priced gold cheaper for non-U.S. investors.

Spot gold fell 0.2 percent to $1,263.96 per ounce by 1010 GMT after touching $1,258.20 earlier in the session, its lowest in almost a week.U.S. gold futures for December delivery fell 0.7 percent to $1,269.30 per ounce.

The dollar steadied above a 2-1/2-year low versus the euro hit in the previous session, but was still looking wobbly due to doubts about whether there will be another U.S. interest rate rise this year.

"We're still in a $1,200-$1,300 range and there doesn't seem enough of anything material to worry investors sufficiently to break us through that upper level," ICBC Standard Bank analyst Tom Kendall said.

"On the downside, on recent occasions where (gold's) got close to $1,200 its been well supported through a combination of physical demand and defensive buying from macro investors."

Global demand for gold fell 14 percent in the first half of this year due mainly to a sharp decline in purchases by exchange traded funds, the World Gold Council said.

Spot gold may retest a support at $1,258 per ounce, a break below which could cause a fall to the next support at $1,247, according to Reuters technical analyst, Wang Tao.

Silver slipped 0.4 percent to $16.48 per ounce after hitting its lowest in more than one week earlier in the day.

Platinum rose 0.2 percent to $944.50 per ounce after rising to its highest since June 14 in the previous session.

Palladium was 0.6 percent lower at $889.30 per ounce, on track to break a streak of nine-sessions of gains.

(Additional reporting by Nithin Prasad and Arpan Varghese in Bengaluru. Editing by Jane Merriman)