1st LD Writethru: Gold down on stronger U.S. data

Gold futures on the COMEX division of the New York Mercantile Exchange fell on Wednesday as a report showed increased orders for American goods.

The most active gold contract for December delivery dropped 5.1 U.S. dollars, or 0.47 percent, to settle at 1,085.60 dollars per ounce.

Gold was put under pressure as a report released by the U.S.- based Institute for Supply Management showed much better than expected strength, with the July non-manufacturing index rising to 60.3. Analysts say this is the highest reading in 10 years. They also took note of an increase in new orders and backlog orders, to 63.8 and 54.0 respectively.

Expectations for an increase in the U.S. interest rate were reinforced by the Wall Street Journal interview with Atlanta Federal Reserve President Dennis Lockhart. Lockhart said he would support an increase in the U.S. central bank's interest rate in September unless there was "significant deterioration" in the U.S. economy.

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.

Silver for September delivery dropped 0.4 cents, or 0.03 percent, to close at 14.553 dollars per ounce. Platinum for October delivery fell 7.6 dollars, or 0.79 percent, to close at 950.90 dollars per ounce. Endite