Gold slips towards $1,350/oz as stocks, dollar climb

By Jan Harvey

LONDON (Reuters) - Gold fell for a second day on Thursday as upbeat U.S. jobs data lifted the dollar, while European stocks edged higher anticipating an interest rate cut from the Bank of England.

Wednesday's better-than-expected ADP employment report raised the question of whether U.S. non-farm payrolls on Friday will be strong enough to revive expectations for a Federal Reserve interest rate hike later this year.

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

Spot gold was down 0.5 percent at $1,351.30 an ounce at 0945 GMT, while U.S. gold futures for December delivery were $7.20 an ounce lower at $1,357.50.

The metal fell 0.4 percent in the previous session as the dollar rallied on the U.S. data, and Wall Street stocks rose.

"We had a bit of an improvement in sentiment on the one hand, and at the same time the ADP report gave some hopes for the employment report on Friday," ABN Amro analyst Georgette Boele said. "Now we have to see how the report is going to be tomorrow, and the Bank of England this afternoon."

European shares rose 0.5 percent on Thursday, helped by the prospect of further policy loosening in the UK.

The quarter-point rate cut that markets expect the Bank of England to deliver at 1100 GMT, to ward off a recession after the UK voted to quit the European Union in June, would be its first reduction since 2009.

"We remain constructive on gold, at least going into Thursday's session where the BoE's expected easing could give the precious metal a bit of a lift," INTL FCStone said in a note. "However, we could run into some selling on Friday if the U.S. non-farm payroll number exceeds estimates."

A number of non-voting Fed governors have indicated that the market should not rule out a September U.S. rate hike, as they currently seem to be, it added.

On Wednesday Chicago Federal Reserve Bank President Charles Evans offered a lukewarm endorsement of a U.S. interest rate increase later this year.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, eased 0.3 tonnes to 969.65 tonnes on Wednesday.

Among other precious metals, silver was down 0.7 percent at $20.21, while platinum was 0.6 percent lower at $1,152.50 and palladium was down 0.3 percent at $706.85 an ounce.

(Additional reporting By Nallur Sethuraman in Bengaluru; Editing by Ruth Pitchford)