Gold News & Info

Source: Bill Musgrave, American Gold Exchange

Austin— Gold fell 2.3% to close under $1,183 as a series of upbeat economic reports revived speculation the Fed may raise interest rates as early as June.

One day after the FOMC's policy statement downgraded the economy and the Commerce Department reported that GDP grew by a meager 0.2% in the first quarter, a new round of data is raising hopes that the U.S. recovery may soon regain its footing.

Jobless claims fell to a 15-year low last week, suggesting that last month's abysmal total of merely 126,000 jobs added to nonfarm payrolls may have been an anomaly. Consumer spending, which accounts for around 70% of GDP, rose by 0.4% in March, led by rising demand for autos. Factory activity in the Midwest also rebounded last month, after plunging to a five-year low in February.

Perhaps most important for the Fed's calculus in timing the first rate hike, the Labor Department reported a rise of 0.7% in the Employment Cost Index, its broadest measure of labor costs including wage growth. The ECI is viewed as one of the better measures of slack in the labor market and future inflation.

The return of positive data appears to reinforce the Fed's view, expressed in yesterday's statement, that stagnation last quarter was due, in part, to "transitory factors." However, the Atlanta Fed is not so optimistic, projecting growth of just 0.9% in Q2. Its forecasting model, called GDPNow, was remarkably accurate last quarter, projecting growth of just 0.1% when most economists expected 1% or more.

The dollar bounced off lows and Treasury yields spiked higher on the upbeat reports, pressuring commodities and safe-haven assets like gold. The other precious metals also retreated, with silver losing 3.3% while platinum and palladium fell 1.8% and 1.1%, respectively.

At the Comex close: June gold fell $27.60 to $1,182.40; July silver lost 55 cents to $16.15; July platinum dropped $21.10 to $1,140.40; and June palladium shed $8.25 to $776.50 an ounce.