Gold eyes worst week in five on strong US data

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Gold eyes worst week in five on strong US data

Reuters - 8/28/2015 8:26:29 AM

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Gold wallowed near recent lows on Friday and was on track to post its biggest weekly drop in five as strong U.S. economic data backed the case for a near-term increase in interest rates.

Spot gold was flat at $1,126.16 an ounce by 0043 GMT, and down 3 percent for the week. The metal touched a one-week low of $1,117.35 on Wednesday and has lost nearly 4 percent since hitting a seven-week top on Aug. 21.

U.S. gold for December delivery edged up 0.3 percent to $1,125.70 an ounce.

The U.S. economy expanded at a 3.7 percent annual pace instead of the 2.3 percent rate reported last month, the Commerce Department said on Thursday in its second GDP estimate for the April-June period.

Economists say entering the current market turbulence with strong momentum will help the U.S. economy shrug off the drag from China's weakness.

The newest evidence of U.S. economic strength should put the Federal Reserve on course to raise interest rates this year, although some analysts say the first rate hike could happen in December instead of September.

U.S. weekly jobless claims remained below the 300,000 threshold for the 25th straight week, suggesting underlying strength in the labor market.

Concerns over a possible U.S. rate increase may have sparked a global stock market rout rather than the devaluation of China's yuan, said Yao Yudong, head of the bank's Research Institute of Finance and Banking.

Yao said the Fed should delay any rate hike to give fragile emerging market economies time to prepare.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, stood at 21.95 million ounces on Thursday, the highest in five weeks.

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