MW: Gold futures slump as lackluster U.S. economic data weigh
Euro's gains, fueled by successful Spanish debt auction, also dent metal
By Nick Godt, MarketWatch
SAN FRANCISCO (MarketWatch) -- Gold futures fell on Thursday, losing ground in part as the euro gained ground in currencies trading following another successful auction of government debt in Spain.
Signs of moderation in U.S. manufacturing, as indicated by Institute for Supply Management data announced for June, also got factored into trading in the precious metal.
Gold for August delivery dropped $10.10, or 0.8%, to $1,235.90 an ounce on the Comex division of the New York Mercantile Exchange. A close around these levels would place gold back near prices seen last week.
The euro rallied to $1.241 in recent action, up from $1.224 in North American trading late Wednesday.
"What you are seeing is this unwinding of the euro-gold trade," said Walter de Wet, analyst with Standard Bank in London.
Investors who bought gold in euros are now selling to cut losses arising from a stronger euro, de Wet said.
Moreover, much of gold's gains since the start of the year came as the European debt crisis reduced confidence in currencies and boosted demand for gold's safe haven.
Gold stayed lower after the. Labor Department reported earlier that first-time jobless claims rose by 15,000 last week to stand at 472,000, confounding economists' expectations for a decline.
Thursday's pullback in gold stood in contrast to its performance during the second quarter, when prices jumped 12% to rack up a seventh consecutive quarterly gain. It rose 1.7% in the first quarter of 2010.
"Technically and from a momentum perspective, gold's trend remains up," says Mark O'Byrne, metals analyst at GoldCore, in a note. "Yet gold is climbing a classic wall of worry in typical bull-market fashion with skepticism and 'gold bubble' talk remaining high."
In addition, gold's recent high prices has stanched physical gold buying and the market has been flooded with scrap gold, de Wet said.
Overnight, two close watched measures of manufacturing activity in China pointed to slowing growth in June, further escalating worries about the state of the world's economic recovery and fueling fears over a drop for commodities such as oil. Read more on China.
Other metals were lower on China's data, with copper and palladium taking the brunt of the sell-off.
Copper for September delivery, the most active contract, declined 5 cents, or 1.7%, to $2.90 a pound. Palladium for September delivery, also the most active contract, lost $9.40, or 2.2%, to $434.60 an ounce, the lowest price since early June.
Silver for September delivery retreated 27 cents, or 1.5%, to $18.43 an ounce.
Gold traders are bracing for more economic data from the United States, with the June Institute for Supply Management manufacturing index and May pending home sales are still due for release on Thursday.
U.S. stocks opened slightly higher Thursday but turned lower shortly after the open. The Stoxx Europe 600 index (ST:SXXP 239.58, -3.74, -1.54%) fell 1.2% to 240 points as bearishness bled into European bourses from selling overnight in Asia.
