Gold little changed after U.S. initial jobless claims surge the most in six months

Gold surged to session high in late European trading after the U.S. Labor Department reported that the number of people who filed for initial unemployment benefits in the week ended October 5 rose the most since March as California worked through a backlog and the budget standoff forced some contractors to pare personnel. An underlying trend however consistent with a moderate recovery of the labor market supported the dollar and pushed gold back to its previous levels.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in December traded at $1 299.10 per troy ounce at 13:15 GMT, down 0.62% on the day. Prices rose to a session high of $1 311.80 an ounce minutes after the release of the data, while days low stood at $1 296.90 an ounce. The metal fell by 1.3% on Wednesday and extended its weekly decline to over 0.9% on Thursday.

Gold initially erased daily losses after the Labor Department reported on Thursday that the people who filed for initial unemployment benefits rose by 66 000 last week to 374 000, defying analysts projections for a surge of between 2 000 and 5 000 claims. This was the biggest increase since the end of March.

The spike was mainly based on a backlog through which California state was working after a switch in computer systems. The technical issues accounted for a half of the additional claims filed last week. In addition, the ongoing partial government shutdown was responsible for about another 15 000 claims as the uncertain economic situation forced some contractors to pare staff.

Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said for Bloomberg before the report: “The longer the government shutdown continues, the bigger the effect on the private sector will be.”

However, the underlying trend pointed that the U.S. labor market is steadily improving. The four-week moving average, which irons out weekly volatility, rose by 20 000 to 325 000 claims filed, remaining at a level consistent with a moderate rate of job growth. This caused gold to fall back to its levels before the release of the data, while the dollar rebounded after it fell to session low.

Paul Ashworth, chief U.S. economist at Capital Economics in Toronto said for Reuters: “The broader picture is still that labor market conditions are improving, albeit not quite as much as we previously thought.”

The dollar index, which measures the greenback’s strength against six major counterparts, traded at 80.61 at 13:07 GMT, up 0.21% on the day. The December contract fell to a session low of 80.41 minutes after the release of the data, but managed to recover shortly after that near days high of 80.68. The U.S. currency gauge rose by 0.5% on Wednesday and extended its weekly advance to 0.45% on Thursday.

The metals demand prospects remained damped throughout the day after Republicans and Democrats representatives said Congressional leaders were willing to agree on a short-term increase of the $16.7 billion borrowing limit. This comes after President Barack Obama launched a series of meetings with lawmakers on Wednesday to search for an exit of the political impasse. Reopening the partially shut federal government and raising the nation’s borrowing limit would put the U.S. economy back on track for recovery and allow the Federal Reserve to pare its monetary easing program.

Morgan Stanley analyst Joel Crane said in a video report today: “We recommend staying away from gold at this point in the cycle.” “Tapering is postponed not canceled, and is expected by year end,” Morgan Stanley analysts said on October 7.