1st LD Writethru: Gold down as potential for U.S. interest rate hike priced in

Gold futures on the COMEX division of the New York Mercantile Exchange fell Monday as the market continued to price in expectations for a future increase in the U. S. interest rate.

The most active gold contract for August delivery lost 25.1 U.S. dollars, or 2.22 percent, to settle at 1,106.80 dollars per ounce.

The precious metal was put under pressure as traders moved to more lucrative assets ahead of a potential increase in the Fed's interest rate. An increase in the Fed's interest rate drives investors away from gold and towards assets with a return, as the precious metal bears no interest.

There has not been an increase in the Fed's interest rate since June 2006, before the beginning of the American financial crisis. Analysts originally expected interest rates to rise in June, but due to weaker-than-expected employment data, expectations were pushed back to September.

The U.S. Dollar Index also rose by 0.03 percent to 97.96 as of 1802 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

Silver for September delivery fell 7.6 cents, or 0.51 percent, to close at 14.758 dollars per ounce. Platinum for October delivery dropped 12.7 dollars, or 1.27 percent, to close at 988.60 dollars per ounce. Endite