NEW YORK/LONDON - Gold fell to nearly a 10-month low on Wednesday, adding to its deepest monthly price declines in more than three years as strong U.S. economic data and higher U.S. Treasury yields buoyed the dollar, further cementing the case for a December rate increase.
The U.S. dollar rallied 0.9 percent against a basket of six major currencies, after oil prices rose sharply and upbeat U.S. economic data and comments by President-elect Donald Trump's choice for U.S. Treasury secretary triggered a selloff in the bond market.
Spot gold was down 1.2 percent at $1,174.44 an ounce by 2:40 p.m. EST (1940 GMT), after falling to $1,170.35, the lowest since Feb. 8.
U.S. gold futures settled down 1.4 percent at $1,170.80 per ounce.
U.S. private employers stepped up hiring in November much more than expected and consumer spending increased last month, giving more ammunition to the Federal Reserve for an interest rate increase.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
"A consensus appears to be growing among Fed voters that the economy requires another rate hike, and today's Beige Book largely confirmed those opinions," said Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto. He added that the Fed was likely to raise rates only gradually next year.
The U.S. economy continued to expand in October and November, the Fed said in its Beige Book report, but wages and prices rose only modestly and the strong dollar weighed on manufacturing.
Gold has shed more than 8 percent in November, the biggest monthly fall since June 2013.
"Recently there's been a perfect storm against gold with higher risk appetite, rising stock markets and bond yields, massive ETF (exchange traded fund) outflows and the withdrawal of speculative financial investors," said analyst Daniel Briesemann at Commerzbank in Frankfurt.
"Normally lower prices should attract higher demand, but the Indian situation is putting the brakes on gold buying."
The shock withdrawal of high-value notes to fight "black money" in India, the world's second biggest consumer of gold, has hit gold demand there during the peak wedding season.
Silver fell 0.9 percent to $16.44 an ounce while platinum eased 0.8 percent to $910.20.
Palladium rose 1.1 percent to $768.20. The metal has risen more than 24 percent this month, its best since February 2008, outperforming other metals.