Gold hastens retreat as dollar gains upper hand

New York (Sept 7 ) - Gold retreated over 1% on Tuesday and is on course for its biggest intraday drop in nearly a month as a buoyant dollar and higher yield took the shine off the metal.

Spot gold fell 1.1% to $1,803.41 per ounce by 10:03 am EDT (1403 GMT), and was set for its worst day since Aug. 9.

U.S. gold futures were down 1.2% at $1,812.50.

The dollar rose 0.4% against its rivals, making gold more expensive for holders of other currencies.

"The gold market is seeing some retracement" with the dollar likely to advance further and pressure the metals, said Daniel Pavilonis, senior market strategist at RJO Futures.

Gold scaled a 2-1/2 month peak on Friday after a surprisingly soft U.S. payrolls report boosted speculation the U.S. Federal Reserve might push back the tapering of its bond purchases.

But "the reality is they (Fed) want to start to taper it off, so the (gold) market is going to look to position itself ahead of it actually happening," Pavilonis added.

The Federal Open Market Committee is scheduled to next meet on September 21-22.

Gold is considered a hedge against inflation and currency debasement, which is caused by massive stimulus measures.

Further denting bullion's appeal, benchmark 10-year yields also rose to an over one-week high, increasing the opportunity cost of holding non-interest bearing bullion.

"In addition, the market is also starting to get a bit nervous because of another failed attempt to break above this key area of resistance around the $1,835 level," said Saxo Bank analyst Ole Hansen. Investors are also looking at the European Central Bank's meeting on Thursday, where it is likely to debate winding back stimulus measures as the euro zone economy roars back to life.

Silver slipped 1.2% to $24.37 per ounce, platinum fell nearly 1% to $1,009.16. Palladium was down 1.2% to $2,381.43.

Reuters