Markets: News  

Gold futures fall sharply after data, Fed

SAN FRANCISCO (MarketWatch) -- Gold prices fell sharply Thursday, settling at their lowest level since May as the U.S. dollar strengthened and a spate of macroeconomic data came in mostly negative.

Manufacturing activity in the Philadelphia area contracted sharply, falling to its weakest level since August, and sales of existing homes fell 1.5% in May as there were fewer lower-priced homes available.

Also, a report on weekly U.S. jobless claims pointed to a still ailing job market, and an initial survey by investment bank HSBC showed China's manufacturing activity in June at its lowest level in seven months.

Gold futures for August delivery (GCQ2) dropped $50.30, or 3.1%, to $1,565.50 an ounce on the Comex division of the New York Mercantile Exchange.

That was gold's sharpest decrease since early April.

"People are shedding risk assets" and gold has been unable to consistently regain its status as a safe-haven asset, said Matt Zeman, head trader and strategist at Kingsview Financial in Chicago. "The longer trend now still remains lower (with) gold trading as any other risk asset out there."

Open interest in gold has been lagging and recent rallies were mainly short-covering, said George Gero, a vice president with RBC Wealth Management, in emailed comments.

Investors will have to brace for upcoming margin calls after the 50-dollar decline, and "longer term we need a few weeks of stable prices after all this volatility to look for a new trading range," he added.

Gold fell $7.40 in the previous session, when the Federal Reserve dashed hopes of more aggressive stimulus measures.

A stronger dollar kept the pressure on gold and other commodities, with the ICE dollar index (DXY) , which measures the greenback's performance against a basket of six major currencies, reaching the day's highs around the time gold closed. The index was recently up at 82.296 from 81.567 in late North American trading Wednesday.

The Fed disappointed investors, adding to gold's woes, Zeman said.

After a two-day meeting ended Wednesday, the Federal Open Market Committee said it will extend a program to replace its purchases of shorter-term securities with longer-term bonds in a bid to lower interest rates at the far end of the yield curve. But the Fed gave a subdued economic outlook and didn't suggest more monetary easing was in the offing. See more about the FOMC decision

Other metals tracked gold lower, with July silver (SIN2) stumbling $1.55, or 5.5%, to $26.84 an ounce. Copper for the same month's delivery (HGN2) retreated 9 cents, or 2.6%, to $3.30 per pound.

July platinum (PLN2) declined $28.20 an ounce, or 1.9%, to $1,438.60 an ounce. Sister metal palladium, for September delivery, was off $10.95, or 1.8%, to $608.55 an ounce.