Gold below $1 300 on positive U.S. data

Gold fell below the $1 300 mark in early European trading as surprisingly positive U.S. data on Thursday spurred speculation that Fed might start tapering its monetary easing program after the next FOMC meeting in September, thus the dollar strengthened.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at $1 286.85 a troy ounce at 7:33 GMT, down 1.86% on the day. The precious metal fell to a two-week low of $1 283.15 an ounce in the early European session. Days high stood at $1 310.65. The metal fell 1.44% on Thursday, extending this weeks decline to over 3.3%

The metal is headed to its biggest drop in the five days ending June 28 as strong U.S. economic data boosted the U.S. dollar. The dollar index, which measures the greenbacks performance against a basket of six major peers, rose 0.86% on Thursday and has advanced 0.8% so far this week after erasing prior weekly losses. On Friday, the U.S. currency gauge traded at 82.44 at 7:33 GMT, up 0.02% on the day. Prices ranged between days high and low of 82.54 and 82.35 respectively.

The U.S. dollar continued to advance as the U.S. Department of Labor reported on Thursday that the number of people who filed for initial unemployment payments decreased by 19 000 to 326 000 in the week ending July 27, beating analysts’ projections to remain flat at 345 000 after the previous week’s reading was revised upward by 2 000 from 343 000.

Meanwhile on Wednesday, the Bureau of Economic Analysis reported that the U.S. economy grew much more than projected, causing speculation to arise that Fed might begin tapering its monetary easing program earlier than expected. The country’s Advance Gross Domestic Product rose to 1.7% in the second quarter, outperforming analysts’ expectations for a decrease to 1.0% from the preceding period’s downward revised reading of 1.1%.

Automatic Data Processing Inc. reported earlier in the day that the U.S. economy created more jobs than projected by analysts. July’s ADP Employment Change indicator rose to 200 000, compared to forecasts for a decline to 180 000 from June’s upward revised reading of 198 000 jobs.

Data also showed that Consumer Spending grew more than anticipated as well. Preliminary Personal Consumption Expenditures rose by 1.8% in the second quarter, surpassing expectations for a drop to 1.6% from the previous period’s 2.6% increase.

James Steel, an analyst at HSBC Securities (USA) Inc., wrote in a note: “Gold falls on U.S. dollar strength as U.S. economic data surprised to the upside. The gold market will likely focus on the upcoming release of nonfarm payrolls data.”

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, fell to 921.05 tons yesterday after remaining unchanged for four days. Holdings have fallen 32% this year to the lowest since February 2009 as investors lost confidence in gold as a safe haven for wealth preservation.

Market players are now eyeing Friday’s crucial U.S. jobless data. According to a survey of economists by Bloomberg, Non-Farm Payrolls probably rose by 185 000 in July, 10 000 less than June’s 195 000. Meanwhile, the U.S. Unemployment Rate is expected to have declined to 7.5% from 7.6% in July, the lowest in four years, which would further strengthen demand prospects in the world’s top oil consumer. However, a strong number will also boost the dollar and spur speculation that Fed might announce it will taper its Quantitative Easing program at the next FOMC meeting in September.