Gold fell on Thursday and closed the first three months of 2013 with a quarterly decline of nearly 5 percent as fears about Europe waned, Wall Street surged and strong U.S. economic data cut demand for a safe haven.
Gold slipped after U.S. GDP data showed the economy expanded at an annual rate of 0.4 percent for the fourth quarter, more than the government had previously estimated. Initial jobless claims rose last week but not enough to suggest the labor market recovery was losing steam.
Strong U.S. employment and housing market reports in the first quarter prompted some Federal Reserve officials to suggest the U.S. central bank should halt its stimulus program earlier than expected, weighing on demand for gold as an inflation hedge.
For the month of March, gold rose 1 percent after five months of declines. The boost came from renewed eurozone fears after Cyprus was forced to accept a tough international bailout to avoid bankruptcy earlier this week.
"Gold has failed to maintain its rally since the Cyprus crisis started because the credit deterioration that could have resulted has not expanded yet at this point," said Ed Lashinski, Director of Global Strategy and Execution for RBC Capital Markets' futures group.
Spot gold was down 0.6 percent to $1,595.70 an ounce by 3:32 PM EST (1932 GMT). Gold prices were down 4.7 percent for the first quarter for a second consecutive quarterly loss.
U.S. gold futures for June delivery settled down $11.50 at $1,595.70 an ounce, with trading volume about 35 percent below its 250-day average, preliminary Reuters data showed.
In euro terms, gold posted a monthly gain of around three percent, its best monthly performance since July.
Gold fell as Cypriots queued calmly on Thursday to withdraw limited amounts of cash, as the island's banks reopened for the first time in two weeks with no sign of a run on deposits as many had feared.
Gold hit a one-month high of $1,616.36 last week on concerns the $10 billion euro rescue deal for Cyprus, which will leave big depositors and private bondholders with huge losses, could become a template for future bank bailouts in the eurozone.
Lashinski called the Cyprus situation a potential "game changer" for gold as the outlook in Europe's credit markets remained uncertain.
Eurozone debt fears had helped power gold to a record high of above $1,920 an ounce in September 2011.
S&P SETS RECORD CLOSE
Safe-haven bids decreased as U.S. stocks rose and the S&P 500 topped the record closing high set in October 2007
Reflecting the stalled momentum in investment demand, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, was set for its biggest quarterly outflow since inception.
Liquidity should return next week, when an European Central Bank policy meeting and U.S. non-farm payrolls could provide trading cues for the gold market.
In other precious metals, spot silver fell 0.9 percent to $28.38 an ounce. Platinum fell 0.8 percent to $1,566, while palladium rose 0.4 percent to $767.72.
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