Gold edges lower on upbeat U.S. data

Gold extended losses on Thursday following the release of upbeat U.S. GDP and jobless claims data, which spurred speculation that the Federal Reserve may being decelerating its monetary easing program in as early as September.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at $1 406.50 per troy ounce at 13:34 GMT, down 0.87%. The precious metal traded lower throughout the day and ranged between days high and low of $1 418.50 and $1 404.00 per ounce. The precious metal fell for the first time in six days, trimming its weekly advance to 0.6% after surging 6.3% in the preceding two weeks.

Gold continued to be pressured by a broadly stronger dollar following upbeat U.S. economic data which exceeded analysts expectations. The Commerce Department reported that the U.S. economy grew more in the second quarter than previously estimated in July. The U.S. Preliminary (Revised) GDP marked a growth of 2.5% from a year earlier, compared to the flash reading of 1.7% published on July 31 and surpassing analysts expectations for a correction to a 2.2% advance. Investments in housing accounted for almost a fifth of the economys growth during the respective three months.

The report also showed that American households had spent more money in the second quarter with the Consumer Spending index surging 1.8% and surpassing analysts expectations for a 1.7% rise. Core Consumer Spending Index, which excludes the more volatile energy and food expenditures, rose by 0.8% in the three months to June, matching the preceding periods advance and analysts projections.

Meanwhile, the Department of Labor reported that fewer people than anticipated filed for initial jobless payments last week. In the week ended August 24, U.S. initial jobless claims fell to 331 000, beating forecasts for a drop to 332 000 from the preceding periods upward revised reading of 337 000 claims.

The upbeat data boosted speculation that the Federal Reserve may begin winding down its Quantitative Easing program in September, which supported the greenback. The dollar index, which tracks the dollars performance against six major counterparts, rose to a new session high of 82.05 minutes after the release of the data, while days low remained at 81.42. The U.S. currency gauge then retreated to trade at 81.99 at 13:33 GMT, up 0.67% on the day, extending its weekly advance to 0.7%.

Gold has been tracking shifting expectations for whether the Federal Reserve will wind down its bond purchasing program in the second half of the year. An exit from the stimulus program would deliver a heavy blow to the metal as it is mainly used as a hedge against inflation, which tends to arise when central banks easy money supply. The gold market went bearish in April as many investors lost faith in the metal as a safe haven for wealth preservation. The low prices however spurred physical demand for coins, bullion and jewelry in its top consumers, as well as reserves expansion and assets diversification by many central banks.

The precious metal rose to a 3 1/2-month high on Wednesday as safe-haven buying continued to underpin the market following the escalating tension in Syria. Both oil and gold however erased some of their earlier weekly gains amid easing concern over an imminent U.S.-led attack against the Syrian regime.

According to a U.S. official, President Barack Obama and his allies are working to define the objectives of a military strike against Syria. It won’t be limited to a one-day operation but Obama said on Wednesday that a “tailored, limited” strike, unlike the unpopular Iraq war, might be enough to send a message that the use of chemical weaponry will not be tolerated. Obama made clear that any military intervention will be limited to avoid dragging the U.S. in another war in the Middle East.

On Thursday however, U.K. Prime Minister David Cameron backed away from trying to earn a swift approval by the British parliament to support the U.S. in attacking Syria. France said that action requires proof, sighting at the U.N. inspection due withing days in the areas where allegedly chemical weaponry was used against Syrian civilians.

Chris Gaffney, the senior market Strategist at EverBank Wealth Management, said for Bloomberg: “The GDP numbers are very big, and puts the story of tapering in September back in the forefront. The drumming of the Syria war has receded today, taking some premium away from gold.”