Gold falls below three-month high, amid dwindling consumer sentiment

Investing.com -- Gold fell slightly on Friday halting a three-day winning streak, as investors looked to lock into profits from a three-month high the previous session.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery lost 1.30 or 0.11% to 1,223.90 a troy ounce. Gold fluctuated between $1,210.80 and $1,224.00 an ounce on a choppy day of trading.

For the week, gold gained 2.81%, its largest weekly gain in at least a month.

Gold likely gained support at $1,211.90, the low from May. 14 and resistance at $1,236.40, the high from Feb. 17.

The precious metal rebounded from session-lows in U.S. morning trading following a wave of soft data. Consumer confidence, one of the lone bright spot in the U.S. economy in recent weeks, appears to have peaked. On Friday, the University of Michigan reported that its Consumer Sentiment Index plunged to 88.6, far below low consensus estimates of a 93.5 reading. In terms of current conditions, the survey indicated a drop of 7.2% to 99.8, the lowest level since October. Consumer expectations are comparatively bleak, falling 7.3% from the last reading to 81.5, the worst level in five months.

Gold pared earlier losses, gaining more than $10 an ounce following the disappointing figures. The downbeat survey comes days after the U.S. Census Bureau reported little change in consumer spending throughout the nation. U.S. retail sales remained flat in April below economists' forecasts of a 0.2 gain. A reading of department store sales for the month showed a sharp decline of 2.2%, while sales of electronics and appliances fell by 0.4%. Since last April, retail sales have edged up only 0.9%, the lowest level dating back to late 2009.

Hawkish policy makers at the Federal Reserve had pointed to strong consumer sentiments and seasonally-affected drags in spending as signals of an improving economy. The downbeat data, however, could appease the doves on the Federal Open Market Committee (FOMC) in favor of a delayed interest rate hike.

Last month, the FOMC removed all calendar references to the timing of its first interest rate hike in nearly a decade. While San Francisco Fed president John Williams said earlier this week that a June rate hike still remains on the table, it is becoming increasingly likely that the Fed will wait until September or even December before raising its benchmark Fed Funds Rate above its current level of zero to 0.25%.

Gold, which is not attached to dividends or interest rates, struggles to compete with high yield-bearing assets in periods of rising rates.

At the same time, the University of Michigan indicated that inflation expectations are going up in large part to increases in energy prices. Inflation expectations over the next year increased 0.3% to 2.9%, according to the consumer survey. The Fed would like to see inflation move toward its targeted goal of 2% annually before it increases interest rates.

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Investors await the release of next week's Consumer Price Index for further indications on the state of the economy. Although the CPI gained 0.2% in March after falling sharply in January, it was still 0.1% lower on a year-over-year basis. Separately, the Personal Consumption Expenditure (PCE) price index for March was up by only 0.3% over the last 12 months.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, was relatively flat on Friday at 93.39.

Elsewhere, Silver for July delivery gained 0.078 or 0.45% to 17.543 an ounce.

Copper for July delivery fell 0.003 or 0.11% to 2.92 a pound.