By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON (Reuters) - Gold prices fell on Thursday, shrugging off early weakness in the U.S. dollar and hitting five-week lows as robust U.S. economic data fed expectations that the Federal Reserve could raise interest rates this year.
Traders will watch U.S. non-farm payrolls data, a key barometer of the world's largest economy due on Friday.
Spot gold was down 0.8 percent at $1,175.53 an ounce at 2:23 p.m. EDT (1823 GMT), after falling to the lowest since May 1 at $1,172.55. U.S. gold futures for August delivery settled down $9.70 an ounce at $1,175.20.
Gold failed to benefit much from waning risk appetite in financial markets. A bond market selloff eased, while the euro paused after a strong two-day run against the dollar. [MKTS/GLOB]
"If this unravelling of core positions continues I think gold will find support, but obviously at this stage it is worrying that the dollar weakness has failed to attract buyers," Saxo Bank's head of commodity research Ole Hansen said.
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"Exchange-traded product holdings are back to 2009 levels and Chinese investors are busy placing bets on their stock markets instead of gold."
Data on Thursday showed that U.S. nonfarm productivity fell sharply in the first quarter, leading to a jump in labour-related production costs. Other data showed first-time applications for unemployment aid fell last week while the number of people on benefit rolls hit the lowest level since 2000.
The reports likely keep the Federal Reserve on track to raise interest rates later this year.
"A lot of (gold's weakness) is pricing in expectations for a fairly positive non-farm payrolls reading tomorrow. All things being equal, it should have been another pretty solid month of gains," Mitsubishi analyst Jonathan Butler said.
Demand for physical gold in the main Asian markets was lacklustre.
Premiums in China have barely moved in the past few weeks from $1.50-$2 an ounce to the global benchmark. In India, prices have been broadly on a par with global prices.
Silver was down 2.4 percent at $16.23 an ounce, after falling to the lowest since May 1 at $16.06. Platinum was down 0.7 percent at $1,096.99 an ounce while palladium was up 0.3 percent at $754 an ounce.
"We believe the prices of platinum group metals will benefit from increased autocatalyst demand," said Capital Economics in a note.
"However, palladium is likely to outperform platinum due to the limited penetration of diesel cars in the U.S."
(Additional reporting by A. Ananthalakshmi in Singapore; editing by William Hardy, David Clarke and David Gregorio)