Gold edged up on Friday but was on track to post its biggest weekly drop in five as strong U.S. economic data backed the case for a near-term increase in interest rates.
A looming U.S. rate hike has dimmed the appeal of non-interest bearing assets as gold, which may explain the fall in the metal from a recent seven-week high even as global equities tumbled on fears over a slowing Chinese economy.
The upward revision in U.S. economic growth in the second quarter to 3.7 per cent from the initial estimate of 2.3 per cent spurred market expectations that the Federal Reserve could still raise rates this year despite the market turmoil.
Spot gold was up 0.4 per cent at $1,129.80 an ounce by 0703 GMT, but down 2.6 per cent for the week.
The metal touched a one-week low of $1,117.35 on Wednesday and has lost more than 3 percent since hitting a seven-week top on Aug. 21.
The robust second-quarter GDP, along with recent strong housing and manufacturing data, will likely prod the Fed to raise interest rates next month, said INTL FCStone analyst Edward Meir.
“For all the talk of market turmoil, it is important to note that the Fed does not typically look at overseas developments to make its rate decision and we don’t think this time will be any different,” Meir said in a note.
