Melbourne - Gold fell, heading for its biggest monthly drop in two years, as the US economy expanded at a faster pace in the second quarter, bolstering expectations of a rate increase this year.
Bullion for immediate delivery slid as much as 0.5 percent to $1 083.18 an ounce and traded at $1 084.57 at 2:50 pm in Singapore, according to Bloomberg generic pricing.
The metal’s retreated 7.5 percent this month for the worst such performance since June 2013. Prices tumbled last week to $1 077.40, the lowest level since February 2010.
Gold’s fallen out of favor with investors as the Federal Reserve prepares to raise borrowing costs this year, boosting the dollar. Data Thursday showed the world’s largest economy expanded at a faster pace in the second quarter after Fed officials concluded this week that the US is making progress.
Traders are increasing bets that the central bank will raise rates at its next meeting in September.
“Gold prices will follow a downward trajectory from here to the second half of next year,” said Vyanne Lai, an economist at National Australia Bank in Melbourne. Prices fell as the dollar strengthened on prospects for rate rises and amid weaker demand for physical gold, Lai said.
Higher rates curb the appeal of bullion, which doesn’t pay interest or give returns like competing assets such as equities and bonds.
The Bloomberg Dollar Spot Index, a gauge of the US currency against 10 major peers, was little changed on Friday and is poised for its best month since January.
Gold assets in exchange-traded products have declined for 11 days. Holdings shrank 3.7 percent in July, set for the biggest monthly drop since December 2013, according to data compiled by Bloomberg as of Thursday.
Futures for December delivery lost 0.5 percent to $1,083.60 an ounce on the Comex in New York. Metal of 99.99 percent purity fell 0.2 percent to 217.15 yuan a gram ($1 087.67 an ounce) on the Shanghai Gold Exchange, heading for a third monthly decline that’s the longest streak since October.
Silver for immediate delivery slid 0.5 percent to $14.676 an ounce, poised for a second monthly retreat. Platinum fell 0.6 percent to $983.68 an ounce and is 8.8 percent lower this month, set for the biggest drop since May 2012. Palladium declined 0.3 percent to $620.20 an ounce, heading for a third monthly loss.
BLOOMBERG