Gold down a third day as ISM feeds dollar lift

By Myra P. Saefong and Barbara Kollmeyer, MarketWatch

SAN FRANCISCO (MarketWatch) — Gold futures settled lower on Thursday to mark their third straight loss, pressured as the U.S. dollar strengthened further after a gauge of U.S. manufacturing activity jumped to its highest level in two years.

The precious metal, however, continued to find some support after the Federal Reserve on Wednesday slightly downgraded its view of the U.S. economic recovery and offered no hints as to when it may begin tapering asset purchases.

Gold for December delivery GCZ3 -1.85%  fell $1.80, or 0.1%, to settle at $1,311.20 an ounce on the Comex division of the New York Mercantile Exchange. The contract has now tallied a three-session loss of around 1.4%.

“Investors are showing no love for the shiny metals ... following the release of strong U.S. economic data, which boosted the dollar’s appeal,” said Fawad Razaqzada, technical analyst at GFT Markets.

“Stocks also rallied and so there was even less reason for investors to buy gold or silver,” he said in an afternoon note. “Both metals remain in a prolong downtrend, although the pace of the selling has certainly eased in recent weeks, along with the speed of [exchange-traded fund] outflows.”

Gold prices were up on the day, trading around $1,322 before the Institute for Supply Management said its July manufacturing index rose to a reading of 55.4% from 50.9% in June. Economists polled by MarketWatch expected a reading of 52.0%.

Other data released Thursday showed U.S. jobless claims fell 19,000 to 326,000, the lowest level since early 2008.

Upbeat data on the economy often draws attention away from the perceived safety of precious metals.

Silver for September delivery SIU3 -1.42%  closed less than half a cent lower at $19.62 an ounce, after earlier highs above $19.90. 

The dollar also strengthened in the wake of the news, with the ICE dollar index DXY +0.02%  at 82.232, up from 81.464 late Wednesday in North America.

Strength in the greenback can add pressure to dollar-denominated commodities, including gold.

Thursday’s economic data come ahead of Friday’s highly anticipated U.S. jobs report for July. Economists surveyed by MarketWatch expect the addition of 175,000 jobs, which would be below June’s gain of 195,000 jobs.

Analyzing the Fed

Gold had seen a firmer start in electronic trading late Wednesday following the Federal Open Market Committee statement that the world’s largest economy was expanding at a “modest” pace. It had called the pace “moderate” in June.

The Fed committee also didn’t signal when it may start winding down its program of buying $85 billion a month in U.S. debt and mortgage-backed securities.

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