(Bloomberg)Â – Gold futures fell, heading for the longest slump in four weeks, after a report showed the US economy in the first quarter contracted less than estimated, supported by a bigger gain in consumer spending. Gross domestic product fell at a 0.2 percent annualised rate, revised from a 0.7 percent drop, government data showed Wednesday. Household consumption grew at a 2.1 percent annualised rate, up from the estimate of 1.8 percent.
After the report, gold dropped as much as 0.7 percent to $1,168.10 an ounce, a two-week low. The metal has slumped this week as the odds increased that the Federal Reserve will boost its benchmark interest rate following gains in the US economy. On Tuesday, government data showed purchases of new homes jumped the most in seven years, while a gold put giving owners the right to sell July futures at $1,175 surged 52 percent.
“The economy has recovered, and there’s just not a compelling reason to buy gold,” Fain Shaffer, the president at Infinity Trading Corp. in Chicago, said in a telephone interview. The price headed for the fourth straight decline, the longest slump since May 27. Aggregate trading was 7.8 percent above the 10-day average for this time, according to data compiled by Bloomberg. Almost 9,600 contracts traded shortly after the GDP report at 8:30 a.m.
The dollar also headed for the longest rally in a month against a basket of 10 major currencies, eroding the appeal of gold as an alternative investment. Higher interest rates curb the appeal of the metal, which doesn’t pay interest such as assets including bonds.
Gold advanced last week on demand for a haven amid the impasse between Greece and its creditors. But on Tuesday, global holdings in exchange-traded products backed by gold fell less than 0.1 percent. The assets climbed in the previous five sessions, the longest advance since April.
Through Tuesday, silver slumped 25 percent in the past 12 months, while gold dropped 11 percent.
