Gold Price Edges Higher on Weaker-Than-Expected U.S. Data
San Francisco (Apr 23) Gold prices inched higher Thursday after a small increase in U.S. jobless claims and a drop in new-home sales encouraged investors to believe the Federal Reserve would put off raising interest rates for a while longer.
Gold for June delivery was up $5.30, or 0.4%, at $1,192.20 a troy ounce on the Comex division of the New York Mercantile Exchange.
The number of Americans seeking first-time unemployment benefits rose by 1,000 last week to a seasonally adjusted 295,000. That was more than the 290,000 claims economists surveyed by The Wall Street Journal had expected, although last week’s number remained consistent with an economy steadily adding jobs.
In addition, sales of newly built homes in March fell 11.4% from February, marking the sharpest drop since July 2013. Economists surveyed by The Wall Street Journal had predicted a 3.5% decline.
”It was a little bit bad news for the economy, which is good news for gold,” said George Gero, vice president of global futures at RBC Capital Markets. Good economic news tends to weigh down on gold, as it suggests the Federal Reserve should “tighten sooner than later,” he said.
Gold prices have benefited from U.S. interest rates being near zero because the precious metal has trouble competing with interest-bearing assets when borrowing costs rise.
Still, gold prices are down 2.4% from their April 6 high of $1,218.60 an ounce. Money managers and funds have been slow to allocate money into precious metals, which has disappointed the market. Funds usually make allocation changes for the second quarter in the second week of April, but strong stock market performances in the U.S. and other countries have dominated investors’ attention.
”We didn’t see any inflows in the first quarter when funds were leaving gold, and we haven’t seen enough of a return for the second quarter,” Mr. Gero said.
Looking ahead, ANZ Research said it is likely the U.S. economy will turn around, which would lift the dollar and put pressure on gold.
“[Gold] prices look ready to resume their downtrend,” it said in a research note.
Source: WSJ
