Gold fell early on Thursday as US consumer spending data and sliding crude oil prices sent prices below a two-month high earlier this week, and a lack of investment interest could further pressure the precious metal, analysts said. Bullion fell after US government data showed a modest increase in consumer spending in May, likely held back by weak healthcare spending, which could prompt economists to temper their second-quarter growth estimates.
The precious metal had gained 4 percent since last Thursday and reached a two-month high on Tuesday at $1,325.90 on concerns over escalating violence in Iraq. Analysts, however, said that gold's gain was largely driven by short covering as speculators aggressively bought back their bearish bets. Gold-backed exchange traded funds have also failed to attract buyers despite bullion's rally.
"With strategic buyers opting not to participate in gold's rally, gold upside is certainly questionable," said Edel Tully, precious metals strategist at UBS. Spot gold was down 0.2 percent at $1,316.50 an ounce by 12:15 pm EDT (1615 GMT). US COMEX gold futures for August delivery were down $6.30 an ounce at $1,316.30, with trading volume on track to finish in line with its 30-day average, preliminary Reuters data showed.
Gold prices also came under pressure on comments from St. Louis Fed President James Bullard that interest rate increases should come sooner rather than later. Also negative was a drop in crude oil prices as fears over conflict causing export disruption from Iraq eased further. Physical gold demand in main consumer China remains lacklustre, dealers said, with higher prices curbing some buying.
China's total gold imports from Hong Kong dropped 17 percent to 67.233 tonnes in May from 80.817 tonnes in April, according to data emailed to Reuters by the Hong Kong Census and Statistics Department. Among other precious metals, silver was up 0.4 percent at $21.07 an ounce, outperforming gold. Platinum group metal investors continued to monitor developments in South Africa where mine workers gradually returned to work after reaching a wage deal with producers to end a five-month strike.
Meanwhile, almost a quarter of a million South African workers in sectors from engineering to communications will strike indefinitely from July 1 in pursuit of a pay claim. Spot platinum was down 0.2 percent at $1,461.00 an ounce, while spot palladium climbed 0.3 percent to $832.10 an ounce.
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