Gold hits session lows after upbeat U.S. consumer spending data

Investing.com - Gold prices fell to the lowest levels of the session on Thursday, after data showed that U.S. personal spending rose more than expected in May, boosting optimism over the health of the economy and supporting the case for a U.S. interest rate hike this year.

The Commerce Department said that personal spending rose by 0.9% in May, the biggest gain since August 2009 and above expectations for a gain of 0.7%. Consumer spending is the single biggest source of U.S. economic growth, accounting for as much as two-thirds of economic activity.

Meanwhile, the core PCE price index inched up 0.1% in May, meeting expectations and after rising 0.1% in April. The core PCE price index rose at an annualized rate of 1.2%, matching estimates and down from a 1.3% gain in April.

The Federal Reserve uses core PCE as a tool to help determine whether to raise or lower interest rates, with the aim of keeping inflation at a rate of 2% or below.

A separate report showed that the number of people who filed for unemployment assistance in the U.S. last week rose last week, but remained in territory consistent with a strengthening labor market.

The U.S. Department of Labor said the number of individuals filing for initial jobless benefits increased by 3,000 last week to 271,000. Analysts had expected initial jobless claims to rise by 4,000 to 272,000 last week.

First-time jobless claims have held below the 300,000-level for 16 consecutive weeks, which is usually associated with a firming labor market.

Gold futures for August delivery on the Comex division of the New York Mercantile Exchange hit an intraday low of $1,171.20 a troy ounce, before recovering to trade at $1,171.80 during U.S. morning hours, down $1.10, or 0.09%. Futures were likely to find support at $1,162.10, the low from June 5, and resistance at $1,200.80, the high from June 22.

A day earlier, gold fell to $1,168.10, the weakest level since June 5, before closing at $1,172.90, down $3.70, or 0.31% amid renewed expectations for higher U.S. interest rates later this year.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

Meanwhile, investors nervously eyed developments in Greece’s debt talks ahead of the looming deadline for Greece to repay €1.6 billion to the International Monetary Fund on June 30. If Greece misses the payment it risks going into default, which could trigger the country’s exit from the euro area.

Negotiations faltered on Wednesday after Greece’s creditors rejected some of its latest proposed reforms and presented the government with counter proposals for a deal to unlock bailout funds.

Discussions were expected to resume in Brussels on Thursday morning, ahead of a Eurogroup meeting of euro zone finance ministers scheduled later in the day.

Also on the Comex, silver futures for July delivery shed 9.1 cents, or 0.57%, to trade at $15.76 a troy ounce, while copper for July delivery dipped 0.7 cents, or 0.27%, to trade at $2.618 a pound.