Gold prices continued their downward trend on Thursday to reach a new 8 week low at levels around US$ 1,306 per ounce as investors responded to indications from the US that the Federal Reserve intends to hike its rates at least once before the end of the year.

In India, prices dipped below Rs 31,000 levels as slow demand from jewellers added to already weak global cues.

The slide in prices had begun about two weeks ago on speculation that the Fed Chair Janet Yellen would make some clear announcement at a meeting with the central bankers in the last week of August. Though she did not make any specific announcement, the decline has continued ever since as a result of various other indicators that a rate hike is near.

Thus prices ended August 3.4% down, the first monthly drop since May, and the first time that prices have closed lower during August (when pre-festive buying from jewellers in India rises) since 2009.

The decline comes against the background of a strong year for the yellow metal which has gained 25% since the beginning of 2016.

It may be recalled that a rate hike seemed imminent earlier this year, but the sudden, and unexpected, Brexit vote, which sent markets into turmoil, had forced the Fed to postpone the decision.

Data showed that the US added 177,000 jobs in August, and the nonfarm payrolls, another key set of economic data that will be released on Friday September 2 could further confirm that trend. A rate hike would make gold less attractive as an investment instrument since it fetches no returns as long as it is held by the investor.

The previous Fed rate hike took place in December 2015 – the first since the global financial crisis of 2008.