By Clara Denina
LONDON (Reuters) - Gold dropped to its lowest in over two months on Thursday, as European shares rose, while investors waited to see if U.S. jobs data could put the Federal Reserve on track to hike interest rates.
Spot gold touched its lowest since June 24 at $1,303.95 an ounce earlier and was down 0.2 percent at $1,306.21 by 1001 GMT. U.S. gold futures fell $2.70 to $1,308.60.
"Having heard the Fed last week saying that the U.S. economy is doing well, an interest rate hike is back on the table and that is driving prices down, especially with the market expecting a good jobs data number tomorrow," Natixis analyst Bernard Dahdah said.
"We expect a Fed interest rate hike in December."
An upbeat payrolls report would reinforce the view that a U.S. interest rate hike is now likely before the end of the year, after Fed Chair Janet Yellen said on Friday the case for higher rates was strengthening.
On Wednesday, Boston Fed President Eric Rosengren said the Fed should consider that quicker interest rate rises over time could stave off risks to the economy, while Chicago Fed President Charles Evans said he was increasingly convinced that U.S. economic growth had slowed permanently.
Gold is highly sensitive to rising U.S. interest rates which increase the opportunity cost of holding the non-yielding asset, while boosting the dollar in which it is priced.
"Technicals show that gold and silver prices need some correction and will see some mild rebound. But, Friday's jobs data is going to be crucial," said Jiang Shu, chief analyst at Shandong Gold Group.
"If the jobs data is going to be good, gold will fall to $1,260-$1,270 levels as markets will hope for a rate hike in September."
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, posted the first monthly dip in August in four months. They fell 1.27 percent to 943.23 tonnes on Wednesday and were down 1.6 percent for the month.
Silver was up 0.1 percent at $18.62 an ounce.
Platinum rose 0.2 percent to $1,050. It touched a fresh eight-week low of $1,043.20 Wednesday.
Palladium was up 0.2 percent at $670.75 an ounce.
(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Mark Potter)
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