Gold plunges to near 3-year lows on surging Philly Fed index

Gold prices hit lows not seen since September of 2010 in U.S. trading on Thursday after a manufacturing gauge for the Philadelphia area of the U.S. beat expectations and strengthened the dollar, which tends to trade inversely with gold.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery were down 5.80% at USD1,294.35 a troy ounce in U.S. trading on Tuesday, up from a session low of USD1,285.25 and down from a high of USD1,352.05 a troy ounce.

Gold futures were likely to find near-term support at USD1,271.80 a troy ounce, the low from Sept. 21, 2010 and resistance at USD1,391.35, Monday's high.

Gold prices fell after Federal Reserve Chairman Ben Bernanke said Wednesday that monetary stimulus measures may taper this year and possibly end next year if the economy improves, though the bottom fell out on better-than-expected data out of the U.S. on Wednesday.

Stimulus programs such as the Fed's monthly USD85 billion bond-buying program weaken the dollar to spur recovery, which makes gold an attractive hedge.

The Federal Reserve Bank of Philadelphia said earlier that its manufacturing index rose to 12.5 in June from -5.2 in May, well above expectations for a -2.0 reading.

A separate report showed that U.S. existing home sales climbed 4.2% to 5.18 million units in May from April’s total of 4.97 million, far surpassing market calls for a 0.6% increase.

Elsewhere, the Department of Labor said the number of individuals filing for initial jobless benefits in the U.S. last week rose by 18,000 to 354,000 compared to expectations for an increase of 4,000 to 340,000, though the numbers failed to seriously halt the dollar's advance, which punished gold even more.

Elsewhere on the Comex, silver for July delivery was down 8.22% at USD19.845 a troy ounce, while copper for July delivery was down 2.62% and trading at USD3.059 a pound.