By Seher Dareen
(Reuters) – Gold prices dropped on Thursday after U.S. economic data showed the country’s economy rebounded faster than previously estimated, boosting the dollar and potentially setting the Federal Reserve on a keener path to fight inflation.
Spot gold dipped 1.5% to $1,786.19 per ounce by 1:42 p.m. ET (1842 GMT), while U.S. gold futures settled down 1.7% at $1,795.30.
New claims for unemployment benefits increased less than expected last week in the United States, while the economy rebounded faster in the third quarter, rising 3.2% against the previously estimated 2.9%.
“Gold is down as the U.S. economy continues to shows resilience, which could allow the Fed to tighten a lot more than what the market is pricing in,” said Edward Moya, senior analyst with OANDA.
The U.S. dollar index edged up 0.4%, making precious metals slightly more expensive for holders of other currencies.
With the Fed raising rates and gold expecting inflows in early-2023 from equities on the back of safe-haven trades, “gold prices are going to move up, but not as much being that the Fed is committed to the 2% inflation target,” said Jeffrey Sica, chief executive officer of Circle Squared Alternative Investments.
Gold prices are on track for a second consecutive yearly decline, with prices down more than $250 since March highs as central bankers hiked interest rates to tame inflation.
While bullion is seen as an inflation hedge, rising interest rates dent its appeal.
Spot silver fell 2.3% to $23.41 per ounce, platinum was down 2% to $977.96, while palladium fell nearly 1% to $1,675.65.
Independent analyst Ross Norman highlighted the issue of book-squaring ahead of the year-end or early new positions being put in ahead of the new year rush, as “thin markets are often prone to exaggerated moves on small volumes.”
(Reporting by Seher Dareen and Arundhati Sarkar in Bengaluru; Editing by Shailesh Kuber)
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