Gold fell more than 1 percent on Friday as U.S. data showing low inflation and improving consumer confidence dampened investor interest, with bullion on track to post sharp losses for a second consecutive month.
Open interest in U.S. gold futures fell to its lowest in almost 4 years, due to a combination of decreasing fund interest, option expiration and squaring of books after investors covered short positions.
Data showing a six-year high in consumer sentiment weighed on gold, a traditional safe haven, while funds largely remained bearish after a mid-April sell-off sent the metal to two-year lows.
(Read More: What Hedge Funds Are Doing With Gold)
Gold had gained more than 3 percent in the prior three sessions. On Thursday, discouraging U.S. growth data and jobless claims data boosted hopes of the Federal Reserve continuing its $85 billion in monthly mortgage-bond purchases.
But for the month of May, gold was on track to fall 5.5 percent following April's decline of more than 7 percent.
"The metals were already under pressure going into the end of the month as many people have a lot of short positions outstanding, and the consumer confidence data just added fuel to selling," said Carlos Perez-Santalla at brokerage Marex Spectron.
Spot gold fell 1.5 percent to nearly $1,393 an ounce. Gold futures settled $19 lower at $1,393 per ounce.
(Read More: Why Doug Kass Bought Gold)
On Thursday, CME data showed Comex gold futures' open interest inched up less than 1 percent to 385,901 contracts, hovering near its lowest level since September 2009. The market gauge was 13 percent lower versus 445,517 lots last Thursday.
Economic optimism and growing investor interest in better-performing assets such as equities explained declining interest in the safe-haven metal, traders said.
Year to date, gold was down nearly 17 percent, while silver fell 26.5 percent, among the top losers in the commodities complex.