* Dollar adds gains on better-than-expected U.S. data
* Trading volumes muted due to China holiday
* Buyers of physical metal cash in gains as pounds falls
* Investors await Friday data for U.S. rate hike clues
(Updates prices; adds comment, NEW YORK dateline, second
By Marcy Nicholson and Swetha Gopinath
NEW YORK/LONDON, Oct 3 Gold prices slipped on
Monday as the dollar gained on stronger-than-expected U.S.
manufacturing data and investors awaited jobs data later this
week for clues about whether U.S. interest rates would rise by
Spot gold reversed gains to fall 0.3 percent to
$1,311.54 an ounce by 3:03 p.m. EDT (1903 GMT), with volumes
muted as China markets were closed for the National Day holidays
from Oct. 1-9.
U.S. gold futures settled down 0.3 percent at
$1,312.70 per ounce.
"Prices are slowly drifting lower ... but they will not come
down too much, particularly ahead of Friday," said Societe
Generale analyst Robin Bhar.
Analysts will look to the U.S. non-farm payrolls report on
Friday for more clarity on whether the U.S. Federal Reserve is
on track to tighten credit by December.
Gold is highly sensitive to rising U.S. interest rates,
which increase the opportunity cost of holding non-yielding
bullion while boosting the dollar and making commodities more
expensive for non-U.S. buyers.
The dollar strengthened against a basket of
"This week ... there are plenty of U.S. macro data to look
forward to which could have a big impact on the near-term
direction of the dollar, and in turn buck-denominated precious
metals," said Fawad Razaqzada, technical analyst for Forex.com.
"So while they appear to be out of favor now, gold and
silver could make a comeback if the incoming U.S. data,
especially the nonfarm payrolls report on Friday, turn out to be
mostly weaker than expected."
Sterling gold prices rose after the pound dropped to
three-year lows versus the euro, and neared three-decade lows
against the dollar. This prompted some British buyers of
physical metal to cash in gains after British Prime Minister
Theresa May set a March deadline for the formal departure
process from the European Union to begin.
"We're seeing some selling back, because obviously sterling
has collapsed a bit, which has pushed the gold price up in
sterling terms, which has seen people taking a profit and
selling rather than buying," one London-based gold dealer said.
Also weighing on gold were reports that Deutsche Bank was
negotiating a reduced settlement with the U.S. Department of
Justice, which boosted risk appetite among investors.
Silver fell 2.2 percent to $18.72 an ounce,
platinum slipped 1.7 percent to $1,006.20, and palladium
was down 1.4 percent at $709.75.
(Additional reporting by Jan Harvey in London and Nallur
Sethuraman and Swati Verma in Bengaluru; Editing by Alexander
Smith and Richard Chang)