NEW YORK/LONDON: Gold dropped in quiet trading on Monday after signs of an improving British business sector and better US manufacturing activities dampened bullion's appeal as an investment hedge.
The metal accelerated losses after data showed growth in the US services sector rebounded from a three-year low, while British businesses boomed and activity at euro zone companies expanded modestly in July for the first time in 18 months.
Monday's data came on the heels of last week's strong US factory activities and a mixed US nonfarm payrolls report that sent gold to its biggest weekly losses in five weeks.
"In the absence of weaker-than-expected macro data, short covering activity is likely to subside, leaving gold to search for support from the physical market," said Suki Cooper, precious metals strategist at Barclays Capital.
Also weighing down on gold was disheartened investment interest. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell on Friday to four-year lows.
Spot gold was down 0.6 percent at $1,304.06 an ounce by 2:46 p.m. EDT (1846 GMT).
US gold futures for December delivery settled down $8.10 at $1,302.40 an ounce, with trading volume at less than 98,000 lots, about 55 percent below its 30-day average, preliminary Reuters data showed.
In recent weeks, the Fed has said it would begin tapering its $85 billion monthly bond purchases if the US economic recovery retained momentum, prompting investors to monitor housing and jobs data closely.
Gold fell nearly 2 percent last week on uncertainty over the time frame of the Fed's scaling back of its stimulus.
The US central bank is nearer to dialing back its massive bond-buying program after the unemployment rate dropped last month, Dallas Fed President Richard Fisher said on Monday, the second Fed official to make that point in as many trading days.
"I am of the opinion that unless we see some disturbing data ... that we should start in September," Fisher told reporters after a speech in Portland, Oregon, adding that he is not alone at the Fed in that view.
US TREASURY YIELD UP
Gold also fell as US benchmark 10-year notes yield climbed as traders reduced their bond holdings on surprisingly strong data on the US services sector.
Analysts said the inverse link between gold and Treasury bond yields has recently strengthened. The 25-day correlation-log between spot gold was at a negative 0.5, the tightest link since April.
As gold pays no interest, the returns from US bonds are closely watched by market participants as a gauge of short-term interest rate.
Among other precious metals, silver fell 0.8 percent to $19.74 an ounce. Platinum rose 0.3 percent to $1,449.75 an ounce and palladium gained 0.2 percent to $731.22 an ounce.
Comments
Comments are closed.