Gold hits one-month low as strong data lift stocks, dollar
LONDON: Gold dropped to its lowest level in a month, extending an earlier fall to below $1,300 an ounce as robust economic data from the US, China and the euro zone deterred investors from buying into safe-haven assets.
Spot gold fell as much as 1 percent to its lowest since June 19 at $1,290.40 an ounce and was down 0.8 percent at $1,292.80 an ounce by 1425 GMT.
US gold slid $12.40 to $1,292.30, after stop-loss orders were placed by traders below $1,300 to limit losses, prompting further selling.
“The dollar is a bit bid after good jobs and housing data, equity markets are also stronger and that is all weighing on gold,” MKS SA head of trading Afshin Nabavi said.
“We saw some stop-losses as we broke $1,300 and there will be more if we take out the $1,286 area.”
The dollar was up 0.1 percent against a basket of main currencies, erasing earlier losses after data showed the number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 8-1/2 years.
Strong employment reports out of the US over the past month have stoked speculation of an early interest rate increase. Higher rates could encourage investors to switch to assets that, unlike gold, pay interest.
Other data showed contracts to buy previously owned US homes hitting an eight-month high, the latest indication that housing is pulling out of a recent soft patch.
The metal was also under pressure from stronger equity markets after signs of improving economic conditions in Europe and China.
Gold had seen support build around the $1,300 level, after deepening violence in the Middle East and Ukraine burnished its appeal as an insurance against risk.
Holdings of the SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, rose for a second straight day on Wednesday, up 0.6 tons to 805.44 tons.
With prices dropping below $1,300, China’s physical buyers — who had been waiting on the sidelines in recent weeks — came back to the market, albeit in a small way.
The country is the world’s biggest bullion consumer.
Prices on the Shanghai Gold Exchange edged up to a premium of $3 to $4 an ounce to the global benchmark from about $1 to $2 on Wednesday.
However, despite the increase in buying on Thursday, demand remains weak compared with earlier this year, dealers said.
China’s net gold imports from main conduit Hong Kong fell to a 17-month low in June as a weaker yuan and adequate stocks curbed fresh purchases.
Sluggish physical demand in Asia could weaken support for any price rally and fail to provide a floor if prices were to decline.
“Going forward I don’t think there is going to be much support for gold, with Chinese demand dwindling and investor demand remaining subdued,” Natixis analyst Bernard Dahdah said.
Platinum was down 1.2 percent at $1,461.20 an ounce, while palladium fell 0.3 percent to $866.00 an ounce and spot silver lost 2 percent at $20.47 an ounce.