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Economic Data Sink Gold

June-dated futures contracts lose $8.70 at $653.90 an ounce.

Gold prices were sliding Thursday as the dollar firmed against the euro following a round of strong economic data from the government.

June-dated futures contracts were losing $8.70 at $653.90 an ounce in recent New York action. Silver dropped 17 cents to $12.94 an ounce.

The bullion exchange-traded funds, which hold bars of precious metal, were off also. The

streetTracks Gold Shares

(GLD) - Get SPDR Gold Trust Report

and the

iShares Silver Trust

(SLV) - Get iShares Silver Trust Report

were both losing about 0.2%.

The Commerce Department says durable goods orders grew 0.6% in April compared with an upwardly revised 5% gain in March. The consensus had been anticipating growth of 0.9%.

Still, experts say the underlying numbers signal strength for the economy.

"On the surface, the number was a little weaker than expected, but there were some upward revisions to March, and nondefense capital goods orders were up," says Stuart Hoffman, chief economist at PNC Financial Services in Pittsburgh. "It's one more reason that the

Federal Reserve

is not going to lower interest rates."

Elsewhere, a robust report on sales of new homes suggested the housing sector could finally be coming out of the doldrums.

Foreign exchange traders bid up the greenback on the news. One euro was trading for $1.3426, down from $1.3463 late Wednesday. The dollar was little changed against the yen at 121.60. The prices of dollar-denominated assets, such as gold, tend to fall when the value of the dollar increases.

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Gold traders say the market action is in part being driven by the pending expiration of the June contract.

"It's typical to see a liquidation ahead of the expiration of a major contract month," says Tony Raia, an analyst at Chicago-based futures broker Linn Group.

As the June contract approaches its termination, speculators are rolling their positions forward to August. Open interest in the near contract recently totaled 15.3 million ounces, down from 15.5 million in the prior session. The total for August had grown to 9.2 million from 8.2 million previously.

Raia also notes that the onset of summer, when many traders take vacation, should lead to choppy markets through Labor Day as overall gold market liquidity wanes.

In the precious metals patch,

Golden Star Resources

(GSS) - Get Golden Star Resources Ltd. Report

was falling 1.3%, while

Eldorado Gold

(EGO) - Get Eldorado Gold Corporation Report

was edging 0.5% lower.

As for base metals, copper contracts were diving nearly 12 cents to $3.19 a pound.

Elsewhere in industrial metals, RBC Capital markets took shares of Canadian zinc producer

Teck Cominco


down to a sector perform rating from outperform. The news sent the shares lower by 1.9% in recent trading.