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GOLD for December delivery, the most actively traded contract, on Thursday fell $US14.10, or 1.1 per cent, to $US1,282.80 a troy ounce, the lowest level since June 19 on the Comex division of the New York Mercantile Exchange.

The number of US workers claiming unemployment aid rose less than expected last week, hovering near a 14-year low reached earlier in July and indicating the economy continues to slowly find its feet. The Federal Reserve, which has a mandate to boost employment while keeping inflation under control, is closely watching the labour market as the central bank rolls back its bond-buying program and starts to debate when to raise interest rates. Higher rates would hurt gold, which has no yield and would struggle to compete with other haven assets, such as Treasury bonds.

Another sign that the economy may be heating up was employers' labour costs, which rose at the fastest rate in nearly six years in the second quarter.

The data came on the heels of Wednesday's better-than-expected US gross domestic product (GDP) growth, which showed the economy rebounded sharply in the second quarter after a slow start in the beginning of 2014. A statement from the Federal Reserve on Wednesday delivered a modestly more upbeat assessment of the economy, stirring more speculation about higher interest rates and hurting gold further.

The numbers suggest Friday's widely followed nonfarm payrolls report for July may beat expectations, a negative development for gold. Many investors believe the report offers the clearest picture of the state of the US recovery.

"All of this recent data taken together is really a nail in the coffin for gold," said James Cordier, a principal at Liberty Trading.

"Psychology has turned. People are truly thinking about higher interest rates."

Another bad sign for gold is the metal's failure to hold its gains, despite rising tensions between the West and Russia and bloody conflicts in Ukraine, Iraq and Israel, investors said. Some investors buy gold as a hedge against political or economic uncertainty, believing it will hold its value better than other assets.

A stronger US dollar is also hurting prices for gold, with the greenback at a near nine-month high against the euro and an almost four-month high against the yen.

"The dollar has rallied and gold has broken," said Ira Epstein, a strategist at the Linn Group.

"It's looking more and more as though August will prove difficult for gold, as events that you'd expect to provide gold with a price lift haven't done so."

Gold prices dropped 28 per cent in 2013, as many traders anticipated that the Federal Reserve would roll back its stimulus efforts, a decision it announced in December. The central bank's bond-buying effort was a key support for gold prices in recent years as investors flocked to the precious metal as a hedge against inflation, a risk associated with loose monetary policy.

Settlements (ranges include open-outcry and electronic trading):

London PM Gold Fix: $USUS1,285.25; previous PM $US1,294.50

Dec gold $US1,282.80, down $US14.10; Range $US1,281.30-$US1,298.80

Sep silver $US20.412, down 18.5 cents; Range $US20.370-$US20.780

Oct platinum $US1,465.20, down $US16.70; Range $US1,463.10-$US1,484.40

Sep palladium $US873.70, down $US6.45; Range $US870.35-$US883.45