Gold fluctuates on mixed U.S. data

Gold swung between gains and losses on controversial U.S. data. The U.S. Department of Labor reported that the number of people who filed for initial jobless payments in the week ended September 21 fell, confounding analysts expectations for a 16 0000 surge. Losses however remained limited amid ongoing U.S. budget stalemate and first drop in four years in consumer purchases. A third straight decline in pending home sales indicated the U.S. housing market recovery is losing steam.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December fell by 0.22% to $1 333.30 per ounce at 14:11 GMT after trading mostly higher throughout the European session. Prices held in range between days high and low of $1 339.60 and $1 329.20 per ounce respectively. The precious metal rose by 0.5% on Wednesday but trimmed its weekly advance to 0.5% following Thursdays retreat.

Gold reversed its daily movement after the U.S. Department of Labor reported that the number of people who filed for initial jobless payments in the week ended September 21 hit a six-year low, boosting speculations that the Federal Reserve might pare its bond purchases in the fourth quarter. The report showed that 305 000 claims were filed last week, confounding analysts expectations for a surge to 325 000 from last weeks upward revised 310 0000 claims filed. The five-week average, which irons out weekly volatility, fell to 308 000 claims from 315 000 in the preceding week. The six-year low reading indicated that the U.S. labor market is consistently healing from the 2007-2009 recession.

Meanwhile, a Labor Department official said that California and Nevada, which experienced difficulties in processing their claims in the past two weeks due to computer updates, have caught up with the recent backlog and all the data has been processed and is exact.

Gennadiy Goldberg, a strategist at TD Securities USA LLC in New York, said for Bloomberg: “The decline in claims is encouraging and suggests ongoing labor-market improvement. Employers are little bit more positive about the economic outlook.”

A separate report showed that year-on-year, the U.S. economy grew by 2.5% in the second quarter, matching its revised preliminary reading. This was a bigger expansion than in the first three months of the year and was considered by analysts as respectable growth given the increased taxes in January and reduced federal budget in March.

The dollar index, which measures the greenbacks performance against six major counterparts, traded at 80.67 at 14:13 GMT, up 0.32% on the day. The December contract rose to a session high of 80.69 after the release of the data, while days low stood at 80.40. The U.S. currency gauge fell by 0.3% on Wednesday but erased its weekly decline and rose by nearly 0.2% on following Thursdays rebound.

Gold and other dollar-priced commodities tend to trade inversely to the dollar. Strengthening of the greenback makes dollar-denominated raw materials more expensive for foreign currency holders and limits their appeal as an alternative investment.

Losses however remained limited as the Commerce Department said that its price index for purchases of goods and services by the American households fell by 0.1% on annual basis in the second quarter, the first decline in four years. Core personal consumer spending, which excludes the more volatile energy and food expenditures, rose only by a 0.6% annual rate in April-June, underperforming expectations and the preceding periods 0.8% advance.

Gold was also underpinned by an ongoing stalemate in the discussions of the U.S. budget for the next fiscal year starting on October 1. Lawmakers are in a conflict over whether to stop funding the health-care overhaul started in 2010, known as Obamacare. A failure to pass a vote could lead to a government shutdown as offices will shut down as their budgets expire.

A separate report by the National Association of Realtors showed that U.S. Pending Home Sales fell by 1.6% in August, underperforming analysts projections for a 1% decrease. Julys reading was revised downward to a 1.4% contraction from initially estimated at -1.3%. Apart from the Northeast, contracts declined across most of the country, spurring concern that the recovery of the U.S. housing market is fragile and losing steam.