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Gold futures fall to 34-month low

Gold futures tumbled below $1,200 an ounce Thursday, extending a slump to a 34-month low, as strong U.S. economic data eroded the metal's appeal as a store of value.

In May, consumer spending rebounded and pending home sales jumped to the highest level since 2006, while jobless claims fell last week, reports showed Thursday.

Assets in the SPDR Gold Trust, the world's biggest exchange-traded fund backed by gold, have slumped 28 percent this year to the lowest level since February 2009.

Donald Selkin, strategist at National Securities Corp. in New York, said the market is "in a severe downtrend, so the psychology has become terrible."

Prices of gold futures for August delivery dropped 1.5 percent to close at $1,211.60 at 1:46 p.m. on the Comex market in New York Thursday. Later in the day, the metal touched $1,196.10, the lowest since August 2010.

This quarter, the price of gold has slumped partly because gains in the economy have boosted speculation that the Federal Reserve will scale back the stimulus measures it has implemented.

The Fed said on June 19 that its asset purchases may be scaled back if the economy continues to improve. Gold has tumbled 28 percent in 2013 after posting 12 straight annual gains.

Billionaire John Paulson is the largest holder in the SPDR, which has plunged $35.2 billion in value this year.

Gold more than doubled from the end of 2008 to a record $1,923.70 in September 2011 as the Fed cut interest rates. The metal fell into a bear market in April, and the decline has "shattered" the confidence of investors betting on an extended rally, according to Credit Suisse Group AG.

Morgan Stanley and Goldman Sachs Group Inc. trimmed gold price forecasts this week.

This quarter, gold has fallen 24 percent. The Dow Jones industrial average gained 3.1 percent. Silver futures for September delivery dropped 0.3 percent to close at $18.553 an ounce on the Comex. The metal has plunged 39 percent this year.

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