Gold headed for its biggest monthly decline in two years as the Federal Reserve moved closer to boosting U.S. interest rates.
The U.S. economy expanded at a faster pace in the second quarter and wiped out a previously reported contraction for the start of year, government data showed Thursday. Figures on Wednesday showed assets in exchange-traded funds backed by gold headed for the biggest monthly drop since 2013.
Investors fled gold in July, with prices falling 7.1 percent on weakening Chinese demand and the prospect of higher U.S. rates, which curb the appeal of gold because it doesn’t pay interest. Fed officials, considering when to begin tightening, said Wednesday that the economy is making progress, keeping market expectations focused on a move as soon as September.
“Gold remains under pressure, within a percent or so of recent lows,” Tai Wong, the director of commodity-products trading at BMO Capital Markets Corp. in New York, said in a telephone interview. “The first quarter was revised materially higher, indicating a better-than-expected first half.”
Gold futures for December delivery fell 0.4 percent to settle at $1,088.70 an ounce at 1:52 p.m. on the Comex in New York. The metal dropped to $1,073.70 on July 24, the lowest for a most-active contract since 2010.
Trading on Thursday was 42 percent above the 100-day average for this time, according to data compiled by Bloomberg.
“The Fed is one of the factors feeding into gold prices, alongside others like signs of weak physical demand,” Neil Meader, a London-based precious metals consultant at Metallis Consulting Ltd., said by telephone. “Gold seems to be over-reacting to negative news, and doing little on positive news.”
Silver futures for September delivery retreated 0.3 percent to $14.696 an ounce on the Comex. Palladium and platinum gained in New York.