Gold opened the week down on Monday, trading close to a 5-1/2-year low, as the U.S. dollar firmed after solid U.S. job gains in July suggested the Federal Reserve could raise interest rates as early as next month.
Spot gold had dropped 0.2 percent to $1,090.25 an ounce by 0041 GMT. The metal fell for a seventh week in a row last week, its longest such retreat since 1999, having struggled to pull away from a 5-1/2-year trough of $1,077 reached during a late rout in July.
U.S. gold for December delivery fell 0.4 percent to $1,089.70 an ounce.
U.S. nonfarm payrolls increased 215,000 in July and wages rebounded after a surprise stall in the prior month, signs of an improving economy that opened the door wider to a U.S. interest rate increase next month. The unemployment rate held at a seven-year low of 5.3 percent.
Payrolls data for May and June was revised to show 14,000 more jobs created than previously reported, and analysts say the report “easily clears the hurdle needed to keep the Fed on track for a September rate hike”.
A looming U.S. rate rise, the first since 2006, had weighed on non-interest yielding gold, pulling more funds to the dollar.
Top gold consumer China is under growing pressure to further stimulate its economy after disappointing data over the weekend showed another heavy fall in factory-gate prices and a surprise slump in exports.
China’s foreign exchange reserves, the world’s largest, fell by $42.5 billion in July to $3.65 trillion, the sharpest monthly drop since March amid signs of capital outflows. The value of China’s gold reserves dropped to $59.24 billion from $62.4 billion.
The decline in holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, continued, hitting 21.47 million ounces on Friday, the lowest since September 2008.
The South African Chamber of Mines said all unions representing workers in the gold sector have rejected the final wage increase offer from bullion producers, setting the stage for protracted negotiations.