* Gold drops more than 5 percent in May
* Open interest in U.S. gold futures hits near 4-year low
* Funds remain bearish after mid-April selloff
* Coming up: U.S. construction spending data on Monday
(Adds comment, market details, updates prices)
By Frank Tang and Clara Denina
NEW YORK/LONDON, May 31 Gold fell almost 2
percent on Friday after U.S. data showing low inflation and
improving consumer confidence dampened investor interest, with
bullion notching sharp losses for a second consecutive month.
A combination of decreasing fund interest, option expiration
and squaring of books after investors covered short positions
also sent open interest in U.S. gold futures to its lowest in
almost four years, traders said.
Data showing a six-year high in consumer sentiment weighed
on gold, a traditional safe haven.
"The metals were already under pressure going into the end
of the month as many people have a lot of short positions
outstanding, and the consumer confidence data just added fuel to
selling," said Carlos Perez-Santalla at brokerage Marex
Spot gold fell 1.6 percent to $1,390.80 an ounce by
3:17 p.m. EDT (1917 GMT), its biggest one-day loss in two weeks.
U.S. Comex gold futures for August delivery settled
down $19 at $1,393 an ounce, with trading volume about 30
percent below its 30-day average, preliminary Reuters data
Gold had gained more than 3 percent in the prior three
sessions as discouraging U.S. growth data and jobless claims
figures boosted hopes for continued Federal Reserve stimulus.
But for the month of May, gold dropped 5.8 percent following
April's decline of more than 7 percent.
On Thursday, CME data showed Comex gold futures' open
interest inched up less than 1 percent to 385,901 contracts,
hovering near its lowest level since September 2009. The market
gauge was 13 percent lower versus 445,517 lots last Thursday.
Economic optimism and growing investor interest in
better-performing assets such as equities explained declining
interest in the safe-haven metal, traders said.
Holdings in the SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, remained unchanged at 1,013.15
tonnes on Thursday, after rising for the first time in three
weeks on Wednesday. But these are still near four-year lows,
having lost nearly 337 tonnes in 2013 so far.
Dealers said interest in physical buying stayed higher after
a mid-April selloff sent the precious metal to two-year lows.
"While all these momentum sellers were getting out of the
ETFs, people who are interested in physical gold view it as a
buying opportunity," said Edmund Moy, chief strategist of Morgan
Gold, which offers physical precious metals in retirement
Among other precious metals, silver fell 2.3 percent
to $22.21 an ounce. Platinum dropped 1.6 percent to
$1,457.49 an ounce and palladium was down 0.9 percent at
$748.47 an ounce.
3:17 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold AUG 1393.00 -19.00 -1.3 1387.00 1421.60 152,517
US Silver JUL 22.243 -0.447 -2.0 22.100 22.855 39,598
US Plat JUL 1461.80 -20.90 -1.4 1453.50 1484.00 10,047
US Pall SEP 753.65 -6.90 -0.9 742.00 760.00 2,861
Gold 1390.80 -22.45 -1.6 1389.80 1421.00
Silver 22.210 -0.520 -2.3 22.200 22.900
Platinum 1457.49 -24.01 -1.6 1459.00 1483.00
Palladium 748.47 -7.03 -0.9 743.50 756.22
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 165,395 230,119 181,650 21.06 0.01
US Silver 43,897 63,237 55,479 33.53 -2.58
US Platinum 11,079 10,859 11,713 22.5 -0.60
US Palladium 3,067 7,006 5,607
(Additional reporting by A. Ananthalakshmi in Singapore;
Editing by David Gregorio and Dale Hudson)