Gold Rises on Weak Dollar, Disappointing U.S. Data
New York (Feb 12) Gold prices moved higher Thursday on a weaker dollar and data showing the U.S. economic recovery remains fragile.
The most actively traded contract, for April delivery, rose $6.90, or 0.5%, at $1,225.90 a troy ounce on the Comex division of the New York Mercantile Exchange.
The dollar eased against a basket of international currencies, giving gold prices a boost. The ICE Dollar Index was down 0.4% at 94.57 after touching a two-week high Wednesday. Gold is traded in dollars and becomes less expensive for foreign buyers when the dollar falls against their home currency.
Gold advanced further after two reports showed the U.S. continues to encounter potholes on the road to recovery. In a worrisome signal of weak consumer spending, January retail sales fell 0.8%. This is the second straight month of declines and comes during the typically busy holiday shopping period.
In addition, initial jobless claims, a measure of layoffs, rose by 25,000 to a seasonally adjusted 304,000 in the week ended Feb. 7. Economists surveyed by The Wall Street Journal had expected 290,000 new claims.
For gold bugs, signs of U.S. economic weakness stoke hopes that the Federal Reserve will delay raising interest rates, a policy shift widely expected in the second half of 2015.
“If we get more rounds of bad data over the coming weeks, you’ll get more sentiment that the Fed is not going to raise rates this year, and that’s supportive of gold right now,” said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago.
Gold is a zero-yielding asset and will struggle to lure investors away from Treasury bonds and other interest-bearing investments when rates climb.
Investors also continue to watch Greece and Ukraine. Eurozone officials are wrangling over Greece’s debt problems, while Ukraine peace talks yielded a cease-fire deal with Russia-backed separatists.
Some traders buy gold on the belief it will keep its value better than other assets in periods of turbulence.
Source: WSJ
