Shares of large gold mining companies fell Monday, along with the price of the yellow metal, in a sentiment shift away from precious metals and other safe havens toward riskier assets like stocks.
Fresh U.S. consumer spending data lessened fears of a double-dip recession.
The U.S. Commerce Department said consumer spending, which accounts for about 70 percent of the nation's GDP, jumped in July at its fastest pace in five months. It was up 0.8 percent on strong demand for vehicles.
It's a little far-fetched to truly believe that we are headed into another recession. This data doesn't support that view at all, Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa., told Reuters.
In Europe, the announced merger of two Greek banks heartened traders: Eurobank and Alpha Bank announced a plan to merge and sell stock in a bid to better ride out Greece's sovereign debt crisis.
Consolidation in the domestic sector makes economic sense given the fragmentation of the market, Deutsche Bank AG said in a note. We would expect the market to react with enthusiasm following the recent pressure on the sector but we maintain our cautious stance ahead of the necessary re-capitalization of the new group.
Another reason for the lessening fears of a recession stemmed from reflections on last week's speech by U.S. Fed Chairman Ben Bernanke, who used the closely-followed talk to express optimism about the economy and also leave the door open to further central bank intervention if the Fed deems that helpful.
Central bankers don't think there's any really immediate screaming problem to deal with and have taken that more positively, Madelynn Matlock, who helps oversee $14.8 billion at Huntington Asset Advisors in Cincinnati, told Bloomberg. Plus, there's the fact that valuation is a whole lot better than it was a couple of months ago. In addition, the absence of any bad news in Europe is good news.
In late afternoon trading, Barrick Gold Corp. fell 1.8 percent, Goldcorp Inc. was down 1 percent, AngloGold Ashanti Ltd. declined 1.5 percent, Newmont Mining Corp. slipped half a percentage point and Kinross Gold Corp. retreated 1.4 percent.
The price of gold on the CME Comex division of the New York Mercantile Exchange fell from $1,797.30 to $1,788.60.