Gold erases partially earlier losses on U.S. data

Gold rebounded off the lows following disappointing U.S. data published earlier today. After dropping 23% this year and hitting a 34-month low today, gold regained some of its positions but still traded more than 2.5% lower.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery stood at $1 238.45 a troy ounce at 14:39 GMT, down 2.87% on the day. The precious metal marked a $53 gap between its daily high and low, which stood at $1 277.25 and $1 223.45, a 34-month low.

Gold regained some of its positions as disappointing U.S. economy news came out at 10:30 GMT. The Bureau of Economic Analysis said final Q1 GDP reading mismatched projections of a 2.4% increase, standing at 1.8%, below Q1 2012s 2.4% figure. Consumer Spending for the first quarter of the year was also lower than anticipated, gaining 2.6%, but straying from the 3.4% forecast and below last years Q1 reading of 3.4%. Core Consumer Spending managed to fulfill expectations and stood at 1.3%, remaining unchanged compared to last year.

However, golds bearish sentiment remains intact after last weeks inflation data and Ben Bernankes statement. The Fed Chairman stated the central bank will most probably wind down its bond purchasing program during the second half of the year and bring it to an end by mid-2014, if stable recovery signs are provided and meet projections. Last week U.S. economic data showed the inflation rate in the world’s largest economy was low and stable, which devalued the precious metals. Core CPI, which excludes the more volatile energy and food prices, rose only by 0.2% in May, compared to 0.1% in April and met projections. On an annual basis Core Consumer Price Index also met expectations and remained the same compared to May 2012 at 1.7%. CPI for May was even lower than anticipated and stood at 0.1%, below forecasts for a 0.2% increase.

Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone for Bloomberg: “Gold and precious metals are out of favor. If there’s something indicating an end to bond buying, then investors turn more negative. Some investors see the knife falling and think it might fall further, so may delay any purchases.”

Investors are now looking ahead into tomorrows key U.S. economic data. Personal Income, Personal Spending, Core Consumer Spending for May, Pending Home Sales and Initial Jobless Claims are expected to provide information whether the U.S. economy is reaching its recovery goals and remain on track with Fed’s expectations.

Elsewhere on the precious metals markets, silver, platinum and palladium also marked major daily losses. Silver for September delivery plunged 3.55% on the day, standing at $18.858 at 14:36 GMT. Platinum October futures traded at $1 323.30 an ounce, down 2.27% on the day. Prices ranged between days high and low at $1 354.35 and $1 318.80 respectively. Palladium for September delivery shed 4.22% off its value, trading at $640.60 per ounce. The metal varied between days high at $667.40 and $638.50.