Gold extended losses on Thursday, reacting to stronger equities and robust US economic data that curbed its safe-haven appeal, and the metal looked likely to fall back towards January’s lows as the dollar index rallied to four-year highs.

Investors will be watching more US data due later on Thursday, including durable goods orders for August, to gauge the strength of the world’s largest economy and the implications for the Federal Reserve’s monetary policy and the dollar.

Markets fear strong data could prompt the Fed to raise the interest rates soon, a move that would affect non-interest-yielding assets such as bullion. Global stocks gained, also dimming bullion’s appeal as an alternative investment.

“The equity markets (have) been strong despite recent losses. This is keeping a rotational shift in funds from going into gold,’’ HSBC analysts said in a note.

“Further dollar or equity gains could push gold below $1,200, which may trigger additional momentum selling,’’ they said, adding that physical demand had so far kept prices from falling below that key psychological level.

Spot gold, dollar

Spot gold dipped 0.2 percent to $1,214.27 an ounce by 0328 GMT, after losing 0.5 per cent in the previous session. It is not far from an 8-1/2-month low of $1,208.36 hit earlier in the week.

The dollar was boosted by data on Wednesday that showed sales of new US single-family homes surged in August to their highest level in more than six years, a sign the housing recovery remains on course.

A slump in the euro also helped the dollar, which scaled four-year highs on Thursday against a basket of major currencies.

ECB chief statement

European Central Bank President Mario Draghi renewed a pledge to keep monetary policy loose for an extended period.

Gold has fallen nearly 6 per cent this month, on course for its biggest monthly loss since June 2013. The metal has erased nearly all its gains for the year due to fears of a US rate rise and the strengthening dollar.

Physical demand has been subdued this year after a record 2013, when prices slumped by 28 per cent, although demand has picked up in recent weeks.

The US Mint has sold nearly 50,000 ounces of American Eagle gold coins so far in September, almost double its total in August, due to a sharp drop in gold prices. Russia increased its gold holdings for the fifth straight month in August, while Kazakhstan raised its holdings by more than half a million ounces, data from the International Monetary Fund showed on Thursday.

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