Gold slips for sixth day after upbeat U.S. data

By Jan Harvey

LONDON (Reuters) - Gold fell for a sixth day on Tuesday, hitting its lowest in more than two weeks after upbeat U.S. manufacturing data stoked expectations that the Federal Reserve would hike interest rates by year-end, driving the dollar higher.

Gold is highly sensitive to rising U.S. interest rates, which lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. The dollar index hit a near two-week high on Tuesday.

Spot gold was down 0.2 percent at $1,308.90 an ounce at 1130 GMT, while U.S. gold futures for December delivery were down $1.30 an ounce at $1,311.40. Spot prices have now wiped out all of last month's slim gains.

Gold remains within the $1,300-$1,350 range it has stuck broadly within for the last six weeks, however. Traders remain on the sidelines ahead of U.S. payrolls data for September, due at the end of the week, and other key events later in the year.

"We've got the non-farm payrolls data on Friday, so a lot of people will be cautious ahead of that," Afshin Nabavi, head of trading at MKS in Switzerland, said. "The market is generally a bit disappointed with gold. Whatever happens, we just don't seem to be able to get above $1,350."

"I guess everyone is waiting for the U.S. election (in November), and then we'll see what happens in December with the rate hike."

While Monday's data showing U.S. factories ramped up activity in September fuelled speculation that the Fed would lift rates at its December meeting, officials remain cautious.

The Fed would probably not be able to cut interest rates as aggressively as the last time around if it were faced with a U.S. recession in the next few years, New York Fed President William Dudley said on Monday.

Gold priced in sterling outperformed spot to rise 0.6 percent on Tuesday as the pound slid to a 31-year low versus the dollar, with worries over the impact of Britain's departure from the European Union rattling the market.

Chinese markets being shut for the Chinese National Day holidays from Oct. 1-9 kept a lid on physical gold demand.

"It would appear that weaker physical demand has put the brakes on the rise in gold prices," Commerzbank said in a note.

Silver was up 0.1 percent at $18.75 an ounce. Platinum was up 0.1 percent at $1,004.50 an ounce, off an earlier three-month low of $996.95, while palladium was little changed at $711.20 an ounce.

(Additional reporting by Nallur Sethuraman in Bengaluru; editing by Susan Thomas and Louise Heavens)