Gold drops as strong data reinforce taper fears

Gold futures on the COMEX division of the New York Mercantile Exchange futures ended lower Tuesday, after a string of positive economic data reinforced expectations that the US Federal Reserve would begin to slow the pace of monetary stimulus.

The most active gold contract for August delivery fell 2.0 US dollars, or 0.16 percent, to settle at 1,275.1 dollars per ounce. Gold had traded as high as 1,289 dollars an ounce but gave back some gains after data showed durable-goods orders rose 3.6 percent in May.

The yellow metal turned lower after data showed that US existing home sales in May rose to their fastest pace in five years and the Case-Shiller April home-price index rose. The figures were credited with lifting the US dollar, which in turn appeared to drive down gold, according to market analysts.

Some analysts say, worries over signs of a credit crunch in China also hang over gold and other commodity markets given the importance of the world's second-largest economy on demand. Concerns over credit-market conditions in China, rising US bond yields and the uncertain economic outlook triggered the current wave of gold selling.

With sales increased 2.1 percent to an annual rate of 476,000, sales of new homes rose in May to the highest since mid-2008 and purchases in the early spring were also higher than originally estimated, the US Commerce Department said Tuesday.

Silver for July delivery rose 3.3 cents, or 0.17 percent, to close at 19.526 dollars per ounce.