Gold drops on strong U.S. economic data, firmer dollar

(Reuters) - Gold prices fell on Thursday due to a firmer dollar and strong U.S. economic data that could prompt the Federal Reserve to keep interest rates higher for longer.

FILE PHOTO: Marked ingots of 99.99 percent pure gold are placed in a cart at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk, Russia March 10, 2022. REUTERS/Alexander Manzyuk

Spot gold fell 0.8% to $1,931.37 per ounce by 1:52 p.m. ET (1852 GMT), after having slipped to as much as $1,918.49. Prices also hit their highest since April 2022 at $1,949.09 earlier in the session.

U.S. gold futures settled down 0.7% at $1,930.

The U.S. economy maintained a strong pace of growth in the fourth quarter as consumers boosted spending on goods, but the momentum appears to have slowed considerably towards the end of the year.

The dollar index gained 0.2%, making gold less attractive for holders of other currencies. [USD/]

Benchmark Treasury yields were also near their session-highs, weighing on bullion. [US/]

“The overall take from this data is the economy and the jobs market remains resilient, the dip in personal consumption in Q4 is probably sentiment driven, but overall it certainly gives the Fed room to be higher for longer,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York.

Initial jobless claims also fell more than expected, signalling a tight labour market.

Money markets are pricing in a 25-basis-points rate hike from the Fed’s policy-setting committee’s two-day meeting next week, with a terminal rate of 4.9% in June, still below the 5% rate backed by many policymakers.

The core personal consumer expenditure numbers on Friday ahead of the meetings next week will be playing on the minds of bulls as well as bears, said independent analyst Ross Norman.

Lower interest rates tend to be beneficial for bullion, decreasing the opportunity cost of holding the non-yielding asset.

Spot silver was little changed at $23.90 per ounce, platinum dipped 1.8% to $1,021.25 while palladium was down 1.4% to $1,674.77.

Reporting by Seher Dareen and Arundhati Sarkar in Bengaluru; Editing by Vinay Dwivedi and Devika Syamnath