NEW YORK/LONDON: Gold fell to a three-week low on Thursday, reversing early gains to end down nearly 1 percent on signs of strong US economic growth and on the European Central Bank's interest rate cut to a record low.
The precious metal posted gains after the ECB cut interest rates and said it could take them lower still to prevent the euro zone's recovery from stalling as inflation tumbles.
Bullion later came under pressure when US GDP data showed economic growth accelerated in the third quarter as businesses restocked shelves. But the slowest expansion in consumer spending in two years suggested an underlying loss of momentum.
A flurry of frantic sell orders shortly after the GDP data briefly hammered gold prices, sending them below $1,300 an ounce and setting the tone for the rest of the day.
From 8:40 to 8:50 a.m. EST (1340-1350 GMT) nearly 30,000 lots were traded, about a fifth of total turnover at the time, Reuters data showed.
The stock market's recent run-up on a better economic outlook also sapped momentum in gold, a traditional safe haven, analysts said. The S&P 500 stock index fell 1.1 percent on Thursday but stayed within striking distance of a record high set last week.
"When the stocks are rallying, investors have little reason to head to safe havens and physical assets like gold, as they can go into the stock market and do well there," said Thomas Capalbo, a precious metals broker at New York futures brokerage Newedge.
Spot gold was down 0.9 percent at $1,305.85 an ounce by 4:08 p.m. EST (2108 GMT), having earlier hit $1,298.31, its lowest price since Oct. 17.
US gold futures for December delivery settled down $9.30 at $1,308.50, with trading volume about 15 percent above its 250-day average, preliminary Reuters data showed, reversing a recent trend of weak turnover.
Gold prices have fallen 20 percent this year on expectations that the Federal Reserve will taper its economic stimulus program.
Analysts say Friday's US jobs report for October may provide the most telling insight into the impact of a government shutdown last month that may provoke an extended continuation of Fed bond buying.
GOLD ETF HOLDINGS UP
Gold investment interest firmed on Wednesday, with holdings of the SPDR Gold Trust, the largest gold-backed ETF, rising 2.1 tonnes to 868.42 tonnes, the first increase since Oct. 22.
The fund, whose purchases of gold are a reflection of a rising investor interest in the metal, has seen over 450 tonnes in outflows this year, driving holdings to their lowest level since early 2009.
Among other precious metals, silver was down 0.9 percent at $21.58 an ounce. Platinum fell 0.9 percent to $1,449.30 an ounce, and palladium dropped 0.5 percent to $758.25 an ounce.
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