Gold hits 2-week low as upbeat US data lifts dollar, yields

July 27 (Reuters) – Gold prices slipped more than 1% to a two-week low on Thursday, weighed down by a stronger dollar and an uptick in bond yields after better-than-expected US economic data.

Spot gold dropped 1.2% to USD 1,948.69 per ounce by 01:53 p.m. EDT (1753 GMT), its lowest since July 12. US gold futures settled 1.2% lower to USD 1,945.70.

“There was a one and two punch on gold with better-than-expected initial claims numbers showing that the strength of the US labor market is resilient,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

“Then also that surprise upside expectation in GDP data as well shows you that if there is any recession, it’s just that no one is seeing it right now. So it paves the way for higher for longer interest rates.”

Data showed the US economy grew faster than expected in the second quarter as labor market resilience underpinned consumer spending.

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 221,000 for the week ended July 22.

Following the data, the dollar index jumped 0.8% against its rivals, making gold more expensive for other currency holders. The benchmark US 10-year yield climbed to a two-week high.

On Wednesday, the US Federal Reserve raised interest rates by 25 basis points as expected. Markets priced in 57% odds of the Fed holding rates for the rest of the year, according to the CME FedWatch tool.

Meanwhile, the European Central Bank (ECB) raised interest rates for the ninth consecutive time on Thursday and kept the door open to further tightening.

Rising interest rates increase the opportunity cost of holding non-yielding bullion.

Spot silver was down 2.8% to USD 24.20 per ounce, platinum fell 2.7% to USD 935.26 while palladium dropped 1.4% to USD 1,240.99.

(Reporting by Brijesh Patel in Bengaluru; editing by Jonathan Oatis and Krishna Chandra Eluri)