Gold prices eased early on Thursday but bounced off their lowest level in nearly four months after data showed the US economy contracted in the first quarter for the first time in three years. The US Commerce Department estimated that gross domestic product shrank in the first quarter at a 1.0 percent annual rate. Economists blamed severe winter weather, and the stock market took the news in stride, with all three major US stock indexes moving higher.
A separate US Labour Department report showed applications for jobless benefits declined last week. Analysts said gold prices should find support in an oversold market, but the precious metal will likely face more headwinds from better overall economic conditions. "The GDP figure has offset the jobless claims which have continued to become better," said Thomas Capalbo, precious metals trader at brokerage Newedge. "However, there is no real safe-haven need in times of an improving economy and stability."
Spot gold fell as low as $1,251.10 an ounce, its lowest since February 4. It was down 0.2 percent to $1,255.29 by 2:42 pm EDT (1842 GMT). US COMEX gold futures for June delivery settled down $3 an ounce at $1,256.30. Analysts noted a breakdown of gold's usual inverse correlation with US bond yields. Yields on 10-year US Treasuries were unchanged after earlier falling to their lowest in 11 months.
Precious metals markets are closely monitoring news major metal exchanges emerged as contenders in developing an alternative to the London silver price benchmark, or "fix," after the century-old system for setting the globally recognised price is disbanded in August. Silver fell 0.2 percent to $18.99 an ounce. Among other precious metals, platinum rose 0.4 percent to $1,454.13 an ounce, while palladium was up 0.5 percent at $833.75 an ounce.
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