Gold Prices Drop Most in Week as U.S. Jobless Claims Fall

New York (May 15)  Gold fell the most in a week as declining U.S. jobless claims signaled a strengthening economy and cut demand for haven assets.

The fewest Americans in seven years filed applications for unemployment benefits last week as the labor market continued to improve. Gold prices tumbled 28 percent in 2013, the biggest annual decline since 1981, as equities rallied and the U.S. economy accelerated.

Bullion holdings through exchange-traded products reached the lowest since 2009 this week as some investors lost faith in the metal as a store of value after the Federal Reserve cut stimulus. Fed Chair Janet Yellen addresses the U.S. Chamber of Commerce today

“Jobless claims dropping below 300,000 is a big deal and people are getting convinced that the economy is showing signs of recovery,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “People don’t need to invest in a safe-haven asset like gold when the economy is doing just fine.”

Gold futures for June delivery dropped 0.7 percent to $1,296.20 an ounce at 8:48 a.m. on the Comex in New York, heading for the biggest loss since May 7.  However, by 10:00am EST spot gold was down only $3.45 to $1301.15.

The metal has rebounded in 2014, climbing 8.6 percent this year through yesterday, as tensions mounted between Ukraine and Russia.

“If the data continue portraying a bright picture of the U.S. economy, we expect gold to give up some” of its recent gains, Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., wrote in a report today.

Silver futures for July delivery lost 1.2 percent to $19.54 an ounce on the Comex.