Gold Prices Jump On Short Covering & Lower U.S. Dollar Index

New York (Jan 23)  Gold prices surge in early U.S. trading Thursday, supported on short covering and bargain hunting amid a solidly lower U.S. dollar index on the day. Gains in gold and silver have been somewhat limited by commodity-market-bearish economic data coming out of China Thursday. Spot gold jumped $16 at $1,251 an ounce. Spot silver rose 26 cents $20.11.

In overnight news, China’s flash purchasing managers index (PMI) fell to 49.6 in January from 50.5 in December—the lowest reading in six months. A PMI reading below 50.0 suggests contraction in the manufacturing sector. This news pressured Asian stock markets and to a lesser degree European stocks. The weaker data is also a bearish underlying factor for the raw commodity sector, as China is the world’s largest consumer of metals and other raw commodities.

Meantime, the data firm Markit on Thursday reported the European Union’s preliminary PMI came in at 53.2 in January from 52.1 in December—the best reading in two and one-half years. This latest economic data from the EU corroborates other recent data that suggests the bloc has pulled out of economic recession. Thursday’s report also hints the European Central Bank will not have to implement additional monetary stimulus measures.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Chicago Fed national activity index, the flash manufacturing PMI, the monthly house price index, leading economic indicators, existing home sales, the weekly DOE energy stocks report, and the Kansas City Fed manufacturing survey.