Gold holds above 2-month low as investors await US jobs data

Gold held steady on Thursday above two-month lows hit in the previous session after the dollar gave up gains as investors wait for clues to the next US interest rate hike from the nonfarm payrolls report on Friday.

"Technicals show that gold and silver prices need some correction and will see some mild rebound. But, Friday's jobs data is going to be crucial," said Jiang Shu, chief analyst at Shandong Gold Group.

"If the jobs data is going to be good, gold will fall to $1,260-$1,270 levels as markets will hope for a rate hike in September."

Spot gold edged up 0.1 per cent to $1,309.76 per ounce at 0343 GMT. The metal touched a low of $1,304.91 on Wednesday, its lowest since June 24.

US gold futures were up 0.1 per cent at $1,312.90.

"A lightening of positioning and a strengthening of the US dollar leading into Friday's US payrolls data is currently keeping gold under pressure," said Sam Laughlin, precious metals trader with MKS PAMP Group.

Gold was unlikely to break below $1,300 before Friday's data, he said.

A payrolls processor showed US private employers added 177,000 jobs in August, above economists' forecasts and supporting expectations for Friday's closely watched US payrolls report to be strong.

An upbeat nonfarm payrolls report on Friday would reinforce the view that a US rate hike may be on the cards, after Fed officials sounded a hawkish note at a meeting last weekend.

On Wednesday, Boston Fed President Eric Rosengren said the Fed should consider that quicker interest rate rises over time could stave off risks to the economy, while Chicago Fed President Charles Evans said he is increasingly convinced that US economic growth has slowed permanently.

Gold is highly sensitive to rising US interest rates which increase the opportunity cost of holding non-yielding bullion while boosting the dollar in which it is priced.

Spot gold may retest a support at $1,306, with a good chance of breaking below this level and falling more to the next support at $1,301, according to Reuters technical analyst Wang Tao.

The dollar index was slightly down at 95.992 after rising to 96.255 overnight, its highest since August 9.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, posted the first monthly dip in August in four months. They fell 1.27 per cent to 943.23 tonnes on Wednesday and were down 1.6 per cent for the month.

Silver was up 0.3 per cent at $18.67 an ounce.

Platinum was flat at $1,048.50. It touched a fresh eight-week low of $1,043.20 Wednesday.

Palladium was up 0.5 per cent at $672.72, after falling to a near six-week low of $665.97.