Gold sees biggest price drop in more than a year

An employee of the German Federal Bank puts a bar of gold on a scale , on Jan. 16, 2013, during a press conference at the German Federal Bank in Frankfurt am Main, Germany.
Frank Rumpenhorst/AFP/Getty Images

NEW YORK The cost of gold plunged Friday amid investor optimism about the the U.S. economy.

Shortly before the end of trading, the price of the metal fell $73 to $1,487 an ounce, its biggest drop in more than a year and the lowest level since July 2011. Gold futures also plunged, notching their biggest one-day fall in more than a year. Gold for June delivery plunged $63.50 to close at $1,501.40 an ounce Friday, the largest drop since February 2012.

In stocks, a drop in energy and mining companies ended a four-day surge in the stock market. The Dow Jones industrial average closed flat points at 14,865. In the first four days of the week the Dow rose 300 points, a gain of 2 percent.

In other trading, the Standard & Poor's 500 fell 5 points, or 0.3 percent, to 1,589. Materials and energy stocks fell the most of the 10 industry groups in the index, 1.7 percent and 1.4 percent. The Nasdaq composite dropped 5 points, or 0.2 percent, to 3,295.

The price of crude oil dropped $2.50 to $91 a barrel in New York trading. The International Energy Agency lowered its forecast for global oil demand this year, echoing predictions made earlier this week by OPEC and the U.S. Energy Department.

One trigger for the latest plunge was a government report that U.S. wholesale prices fell the most in 10 months in March. The sharp drop in gold futures tugged down mining companies. Barrick Gold lost 7 percent to $23.05, Newmont Mining fell 5 percent to $36.72 and Freeport-McMoRan 3 percent to $31.87.

Major indexes remain on track to end the week with strong gains. For the week, the Dow and the S&P 500 are still up 2 percent.

A handful of reports out Friday also heightened concerns about the economy. Sales at U.S. retailers fell in March and companies restocked their shelves at a much slower pace in February than in the month before. That's usually a sign companies expect weaker spending from consumers and businesses. A measure of consumer sentiment from the University of Michigan also slumped.

The stock market has held up well despite a string of recent reports that point to a weakening economy. That resilience has "left a lot of investors scratching their heads," said Lawrence Creatura, a fund manager at Federated Investors.

This earnings season will likely determine which direction the market takes, Creatura said. Next week, when Bank of America, Google and other big names turn in their quarterly results, could make the difference.

The weaker economic reports pushed traders into the safety of Treasurys. In the market for U.S. government bonds, the yield on the 10-year Treasury note dropped to 1.72 percent from 1.79 percent late Thursday.

Investors seem to be in the habit of brushing off any worrying news this year, Creatura said. Recent threats from North Korea, for instance, have rattled South Korean markets. The country's main index, the KOSPI, has lost 4 percent over the past month. But any concerns have yet to shake U.S. markets. South Korea may be the seventh-largest trading partner of the U.S., but most investors see North Korea's bellicose talk as more bluff, Creatura said. Everything could change, however, if war looked likely.

"We're following the situation," he said. "It's part of our job. But just because there hasn't been a reaction so far doesn't mean we'll overlook really bad news."