Gold turns lower as U.S. data takes pressure off dollar

By Marcy Nicholson and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold turned lower on Thursday, dipping back below $1,100 an ounce as a steeper-than-forecast drop in U.S. jobless claims helped the dollar recover from earlier lows, though prices remained under pressure after this week's plunge.

Gold posted its deepest one-day loss in nearly two years on Monday, pushing prices through key chart levels and setting it up for further weakness. Low prices tempted some buyers back to the market on Wednesday, but gains remained muted.

Spot gold was down 0.3 percent at $1,089.34 an ounce at 2:53 p.m. EDT (1853 GMT), off a high of $1,105.60. U.S. gold futures for August delivery settled up 0.2 percent at $1,094.10.

"The markets are all focussing on a September rate hike, so assuming that is when it occurs, you have to think that gold is going to remain under downward pressure up until that point," Citi analyst David Wilson said.

Gold has been undermined this year by expectations that the U.S. Federal Reserve is on track to raise interest rates for the first time in nearly a decade, boosting the cost of holding non-yielding bullion and lifting the dollar.

"If you're thinking about the Federal Reserve hiking rates in September maybe December, in real terms that could be a larger impact than you may have thought," said Bart Melek, head of commodity strategy for TD Securities in Toronto, noting there is not enough inflation to attract buying of gold.

Technical analysts, who study past price patterns to estimate the future direction of trading, say once its current bounce from Monday's slump is over, the next target for gold below its Wednesday low near $1,087 an ounce is $1,044, its 2010 low.

"The bounce in gold is nothing but a technical trade, as most major momentum indicators are showing that the recent selloff is overdone," AvaTrade's chief market analyst Naeem Aslam said.

Investors continue to cut their exposure to gold. Holdings in the biggest gold-backed exchange-traded fund, SPDR Gold Shares , shrank for a fifth day on Wednesday to their lowest since 2008.

Some demand emerged for physical metal, however. A retreat in the dollar , which fell 0.5 percent against a currency basket, encouraged some buying in China overnight, dealers said, while weak gold prices spurred buying of bullion coins in the United States where Mint sales jumped to a 2013 high.

Silver was down 1 percent at $14.63 an ounce. Spot platinum fell 0.8 percent at $971 an ounce, while spot palladium was down 1.6 percent at $613.75 an ounce.

(Additional reporting by Manolo Serapio Jr.; Editing by David Evans and Chizu Nomiyama)