Gold price slides to 8-month low as US rate hike looms

San Francisco (July 16)  Gold fell to an eight-month low on Thursday after the U.S. Federal Reserve's reiteration that interest rates were likely to rise this year pushed the dollar index to a six-week high.

A global share rally after the Greek parliament passed the austerity measures demanded by lenders to open talks on a multi-billion-euro bailout also diverted some attention from gold.

Platinum hit its lowest since February 2009 at $1,000.25 an ounce, hurt by perceptions of plentiful supply. Top producer Anglo American Platinum said on Thursday its output rose 60 percent in the second quarter.

Palladium slipped to its lowest since November 2012.

Spot gold had fallen 0.4 percent to $1,144.60 an ounce by 1402 GMT, while U.S. gold futures for August delivery were down $4.00 an ounce at $1,143.40.

Spot prices fell earlier to their lowest since November at $1,142.10 after Federal Reserve Chair Janet Yellen confirmed on Wednesday the central bank will likely raise interest rates later this year if the U.S. economy expands as expected.

Gold is sensitive to rising U.S. interest rates, as they increase the opportunity cost of holding non-yielding bullion and help the dollar.

"The market is beginning to focus on the timing of the rate hike and we are seeing that supporting the dollar, and that's why we are seeing gold grinding lower," Danske Bank senior analyst Jens Pedersen said.

The dollar hit a six-week high against a basket of currencies as fading concerns over Greece shifted the focus back to the outlook for yield differentials in different economies.

The Fed has indicated that the timing of a rate rise will depend on economic data. There was more evidence on Thursday of an improving labour market, with initial claims for U.S. state unemployment benefits dropping in the week to July 11.

Premiums for physical gold on the Shanghai Gold Exchange picked up slightly to $2-$4 an ounce over the spot price, although analysts say a slowing economy could cap demand from China, the world's top gold consumer.

"While gold remains out of favour among investors, the potential return of Chinese buyers seeking an alternative to equities and real estate remains the key bullish wild card," Julius Baer said in a note. "However, the Shanghai Gold Exchange shows no pick-up in demand yet."

Silver was down 0.7 percent at $14.98 an ounce and palladium was down 0.7 percent at $633 an ounce, off a low of $622.75.

Source: CNBC