Gold prices have slumped to a two-month low amid signs of U.S. economic strength and fear that the Federal Reserve will increase interest rates sooner than expected.

December gold futures dropped to $1,273.40 on the Comex Thursday, the lowest level since June 18. The contract rebounded to $1,281 Friday afternoon after Fed Chair Janet Yellen said she sees labor market slack, easing concerns about a rise in interest rates.

Gold rose earlier in the summer on concern about the military conflicts in the Mideast and Ukraine. But it has slipped 4.9 percent from its July 10 peak.

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And many market participants say the precious metal is headed lower still.

"Gold's longer-term fundamentals are firmly aligned toward the bearish," Paul Christopher, chief international strategist at Wells Fargo Advisors, told The Wall Street Journal.

Investors likely confront a future "where yields are higher, and there is no inflation in sight," he said. "Historically, that's been bad for gold."

The economy grew 4 percent in the second quarter, and non-farm payrolls have risen more than 200,000 for six straight months. That's the longest such streak in 17 years.

And it has contributed to calls by hawkish Fed policymakers to push up the timetable for raising rates. The market consensus has been that the central bank wouldn't move until at least the second quarter of next year.

"The market is digesting the likelihood of the Fed raising rates, given the improvement in the numbers," Tim Evans, chief market strategist at Long Leaf Trading Group, told Bloomberg.

"That’s very dollar-bullish, and it’s creating a lot of pressure on dollar-denominated assets, especially gold."

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