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Gold drops on technical, bright U.S. economic data

Gold breaks below $1,300 psychological level, while Platinum, palladium retreat after 3-day rally

Published: Updated:

Gold fell almost 1 percent on Thursday on technical selling after prices broke below the important $1,300-an-ounce chart level, while U.S. jobless claims data and consumer prices pointed to a firming economy that reduced gold's risk premium.

Palladium and platinum retreated after a three-day rally spurred by rising labor tensions in major producer South Africa.

New applications for U.S. unemployment benefits hit a seven-year low last week while consumer prices in April recorded their largest increase in 10 months.

“Gold's fall is largely technically driven as prices have traded around the psychological support at $1,300 an ounce, as investors digested the U.S. economic reports today,” said Howard Wen, metals analyst at HSBC.

Spot gold fell 0.9 percent to $1,293.0 an ounce by 2:08 p.m. EDT (1808 GMT).

U.S. COMEX gold futures for June delivery settled down $12.30 at $1,293.60 an ounce, with trading volume about 10 percent above its 30-day average, preliminary Reuters data showed.

Gold, used by some investors as a hedge, has recently risen when Wall Street stocks fell, but that inverse correlation did not hold on Thursday. U.S. equities slid after disappointing earnings from bellwether retailer Wal-Mart Stores Inc overshadowed the positive economic reports.

Spot silver fell 1.6 percent to $19.40 an ounce.

Platinum, palladium drop

Platinum group metals also fell as some investors locked in profits after their recent sharp gains.

Platinum was down 0.8 percent at $1,463.25 an ounce, while palladium fell 1.6 percent to $811 an ounce.

South Africa's longest and costliest strike ever has taken a violent turn in recent days, with four platinum miners killed as more employees try to report for work at the world's top producers, defying union orders.

South Africa's police minister on Wednesday vowed to crack down on violence against miners trying to return to work and arrest “within hours” strikers that he said were behind a campaign of intimidation.

South Africa is the world's top platinum producer and second-biggest palladium producer after Russia.