Morning Gold: Gold Under $1,300 Hit by Economic Data

Gold Morning

(Reuters) – On Tuesday, gold dropped about 1% as data representing economic growth on both sides of the Atlantic injured its appeal as a safe haven, while a firm dollar as well weighed prices down.

The data showed that growth in the U.S. services sector recovered from a three-year low, while British businesses rumbled and activity at euro zone companies extended, although slightly, in July for the first time in 18 months.

Spot gold dropped as much as 1.2% to reach $1,287.44 an ounce early in the day and declined 0.8% at $1,293.21 by 0945 GMT.

December U.S. gold futures decreased $9.80 to reach $1,292.60 an ounce.

The London A.M. fix is $1,292.00.

Traders said, losses were worsened by technical selling, as automatic sale orders were positioned by traders under the $1,300 an ounce mark to limit losses.

Bullion dealer Sharps Pixley CEO Ross Norman stated “We fell through the psychological support level of $1,300 last night, and it does feel as the prevailing dollar strength is curtailing gold momentum,” also added “It is hard to read too much into moves during the summer months as the market can fluctuate widely on very small trades, I suspect we can see some more downside from here in the short term.”

The dollar was firm against other major currencies and European shares were mixed. Benchmark U.S. Treasury yields increased to about 2.65%, under July’s two-year peak of 2.755% but still higher than at the beginning of the year.

Gold has lost about 25% of its value this year on fears the U.S. Federal Reserve will taper its monetary stimulus on clues of economic rebound.

On Monday, Dallas Fed President Richard Fisher restated that the stimulus tapering is probably will begin sooner rather than later.

On Tuesday, gold prices on the Shanghai Gold Exchange dropped 1.4% on lower demand, dealers said.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded (ETF) fund, holdings declined 0.2% to reach 917.14 tons on Monday.

In July, gold outflows from exchange-traded products (ETPs) reached $2.6 billion, bringing total recoveries for the year at $30.9 billion. (Data from money manager BlackRock)