Gold prices drop as firmer dollar, bond yields dent appeal

Gold prices fell on Wednesday, as the U.S. dollar and Treasury yields rose after economic data bolstered expectations the Federal Reserve will continue on an aggressive rate-hike path.

FUNDAMENTALS

* Spot gold was down 0.3% at $1,696.30 per ounce, as of 0127 GMT.

* U.S. gold futures were down 0.3% at $1,708.30.

* The dollar index was up 0.2%, inching closer to the two-decade peak scaled in the previous session, making gold more expensive for overseas buyers.

* Benchmark U.S. Treasury yields rose to their highest level since June 16 on expectations the Fed will keep hiking interest rates to tame soaring prices. Higher yields raise the opportunity cost of holding non-yielding gold.

* The U.S. services industry picked up again in August for the second straight month amid stronger order growth and employment.

* Gold imports by India, the world's second-biggest bullion consumer, halved in August from year-ago levels, as volatile local prices and a weak rupee prompted consumers to postpone purchases, a government source told Reuters on Tuesday.

* Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.21% to 971.05 tonnes on Tuesday from 973.08 tonnes on Friday.

* Spot silver fell 0.7% to $17.92 per ounce, platinum was 0.7% lower at $847.46 and palladium shed 1% to $1,986.79.

DATA/EVENTS (GMT)

0130 Australia Real GDP QQ, YY SA Q2

0300 China Exports, Imports YY Aug

0300 China Trade Balance Aug

0600 Germany Industrial Output MM July

0600 Germany Industrial Production YY SA July

0600 UK Halifax House Prices MM, YY Aug

0645 France Reserve Assets Total Aug

0900 EU GDP Revised QQ, YY Q2

1230 US International Trade July

1800 US The Federal Reserve issues the Beige Book of economic condition