Gold prices dropped on Monday after US consumer spending data pointed to a strengthening economy, but losses were limited as pro-democracy protests in Hong Kong added to worries about growth in China. Mass protests in Hong Kong stirred unrest in the global financial hub and in China, which rules its special administrative region under a "one country, two systems" formula that accords the territory only a degree of democracy. Global shares broadly fell.
Meanwhile, US consumer spending rose 0.5 percent in August, offering the latest suggestion that years of exceptionally low interest rates have finally pushed the economy into a higher gear. "It's hard to see any major upside from here. From a macro point of view, the attention is pretty much focused on the strength of the US economy and the dollar," said Mitsubishi Corp strategist Jonathan Butler.
Spot gold was down 0.2 percent to $1,217.20 an ounce by 2:14 pm EDT (1814 GMT). US COMEX gold futures for December outperformed spot, settling up $3.40 at $1,218.80 an ounce. The dollar index turned flat after hitting a four-year peak hit earlier in the day as the market looked ahead to a series of important economic data, culminating in the release on Friday of US September non-farm payrolls.
The bigger impact on gold prices could still come from US data as market players seek to gauge the strength of the economy and its impact on Federal Reserve policy. Strong economic data could prompt the US central bank to raise interest rates faster and sooner than expected, which could boost the dollar and hurt non-interest-bearing bullion. Unrest in Hong Kong also could hit retail sales in the region, a hot spot for tourists from mainland China, especially during the one-week National Day holiday that begins on Wednesday, bullion dealers said.
As a gauge of wider investor sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 1.20 tonnes to their lowest since December 2008 at 772.25 tonnes on Friday. Among other precious metals, silver fell 0.5 percent to $17.53 an ounce, just above a four-year low of $17.30 hit on September 22. Platinum edged up 0.6 percent to $1,304.49 an ounce, after earlier hitting its lowest since June 2013 at $1,289.90. Palladium gained 1.9 percent to $785.20 an ounce.