Investor appetite for gold and the SPDR Gold Trust (ETF) (NYSEARCA:GLD) is fizzling out as the appeal of equities improves amid bullish economic data. Growing expectations, once again, that the Federal Reserve will accelerate the path to higher interest rates this year have also added pressure on gold prices.
During the morning hours of European trading, gold futures for August delivery fell to as low as $1,310.50 a troy ounce. Gold ceded ground in the last session as well as it pulled back 0.98%.
Looking at the longer term performance of the yellow metal, it is still up about 25% so far in 2016. Gold prices rose strongly in the first quarter at a time when mixed economic data made investors believe that the Fed might find it difficult to follow through with its promised interest rates review. The Fed may still back off on raising rates as they have repeatedly on any excuse – the latest being Brexit – so any failure from the Fed to follow through could quickly bring gold back up again.
Slight Recovery in crude oil prices
Though bullish labor, retail and housing data from the U.S. have dampened the appeal of gold, the recovery in crude oil prices is adding to the pressure on bullion. Crude oil futures for September delivery were seen rising more than 0.26% in the morning hours of European trading and had hit an intraday high of $46.09.
Reports of shrinking U.S. crude oil stockpiles have eased fears that another round of crude oil supply glut in the global market was in the offing.
Bullish economic data
Investors are turning their back on gold as they flock to equities amid positive U.S. economic data reports. So far the U.S. has released bullish growth numbers for the labor, housing and retail industry for the month of June. If those numbers are compared with the ones for May, they suggest that the U.S. economy is regaining speed. Such bullish data also removes some obstacles in the way of the Fed to raising interest rates.
A strong dollar is also adding to the optimism of U.S. economic growth. But a stronger dollar dulls the appeal of gold for foreign investors holding rival currencies.