Gold retreats following positive U.S. data

Gold erased prior daily gains during early American trading on Wednesday as upbeat U.S. data strengthened the dollar, pressuring dollar-denominated commodities.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at $1 331.85 at 14:09 GMT, down 0.21% on the day. Prices ranged between a 1-month high of $1 347.85 that was hit during Asian trading and a freshly touched days low of $1 331.65. The precious metal gained throughout the last four days, bringing this week’s advance to over 2.8% after surging almost 6% during the previous two 5-day periods.

Gold advanced 8% in July as Federal Reserve Chairman Ben Bernanke reinforced Fed’s view at his testimony to Congress last week that Quantitative Easing is still expected to be tapered within the year and brought to an end by mid-2014, if the requirements are fulfilled. However, the Fed chief stated the U.S. economy currently needs the central bank’s accommodative monetary policy in the foreseeable future and it can even be accelerated, if recovery slows its pace.

On Wednesday, upbeat U.S. data allowed the dollar to regain positions after plunging near Tuesdays one-month low due to a stronger euro that was boosted by unexpectedly positive Eurozone economic data. However, the dollar index advanced more than 0.2% on the day as Julys Markit Flash U.S. Manufacturing PMI surpassed analysts expectations and surged to 53.2, compared to Junes final estimate of 51.9 and projections for a rise to 52.6.

Meanwhile, Junes New Home Sales also surpassed anticipations for an increase to 0.484 million and surged to 0.497 million. Mays reading was revised downwards to 0.459 million from 0.476 million new homes sold.

Gold tends to trade inversely to the U.S. dollar. Strengthening of the currency makes dollar-denominated commodities more expensive for foreign currency holders and reduces their appeal as an alternative investment. The dollar index for September settlement traded at 82.28 at 14:11 GMT, up 0.24% on the day. The U.S. currency gauge fell to a days low of 82.02, near Tuesdays one-month low, after which a rebound followed to 82.34 minutes after the economic data was released and laid pressure on the precious metal.

The yellow metal has mainly been tracking shifting expectations for an earlier-than-expected deceleration of Feds Quantitative Easing program. Signs of a consistent recovery of the U.S. economy reduce the need for the central bank to ease money supply, thus reducing demand for gold as a hedge and strengthening the greenback. According to a Bloomberg survey that was conducted between July 18 and July 24, half of the economists polled said Fed will begin tapering its Quantitative Easing program in September, up from 44% in the preceding month’s poll. According to a UBS report from July 2, slow economic growth in the U.S. will boost equities more than commodities, which is bearish for gold.

Elsewhere on the precious metals market, silver declined, while platinum and palladium gained on the day. Silver for September delivery traded at $20.228 an ounce at 14:04 GMT, down 0.13% on the day. Prices ranged between days high and low of $20.517 and $20.140 respectively. Platinum October futures surged to $1 459.70 per troy ounce, up 1.15% by the day. Futures held in a wide range between $1 464.30 and $1 441.90. Meanwhile, palladium for September delivery traded at $742.40 at 14:05 GMT, marking a 0.40% daily advance. Prices ranged between days high and low of $746.40 and $735.80 respectively.