Gold surges to session high on U.S. employment data, consumer inflation

Gold surged to session high during European trading after Automatic Data Processing reported U.S. companies added less jobs in October than expected. A separate report by the Department of Labor showed consumer prices rose in line with expectations and the underlying inflation remained benign, giving policy makers more room for monetary easing.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in December rose by 0.77% to $1 355.80 per troy ounce by 13:29 GMT. Prices surged to session high of $1 358.80 an ounce minutes after the release of the data, near Mondays 1-1/2 month high, while days low remained at $1 338.70. an ounce. The precious metal shed 0.7% on Tuesday but rose back to positive weekly territory following Wednesdays rebound and was up 0.4%.

Futures extended gains after numbers by the ADP Research Institute in Roseland, New Jersey, showed that the U.S. economy created 130 000 jobs in October, confounding expectations for a surge to 148 000. Septembers reading received a downward revision to 145 000 from initially estimated at 166 000. This was the first employment data to provide information how the U.S. labor market fared during the 16-day government shutdown that began on October 1.

Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, commented for Bloomberg: “Obviously, there was some impact of the government shutdown. The Fed has been very clear that the tapering decision is going to remain data dependent, and this suggests it’s still not quite strong enough.”

The downbeat reading added to reports from last week which showed that U.S. non-farm payrolls rose by 148 000 jobs in September, sharply underperforming a median forecast of 93 economists surveyed by Bloomberg for a 180 000 surge. The participation rate, which measures the number of people who are either employed or are actively looking for work, remained the lowest since August 1978 at 63.2%.

On Thursday, the Labor Department reported that the number of people who filed for initial unemployment benefits in the week ended October 19 fell by 12 000, underperforming the median estimate of 48 economists surveyed by Bloomberg for a fall to 340 000. The preceding period’s reading received and upward revision to 362 000 from initially estimated at 358 000.

On October 31, the Labor Department is expected to report that initial jobless claims fell by 12 000 to 338 000 during the week ended October 26.

A separate report today showed consumer prices marked a modest gain in September but the underlying inflation remained benign, providing the Federal Reserve with additional room for monetary easing as it generally targets 2% inflation. The Consumer Price Index gained 0.2% last month, matching forecasts and beating Augusts 0.1% advance. Year-on-year, consumer prices jumped 1.2% and matched predictions but underperformed the preceding months 1.5% surge. Most of the advance was due to a 0.8% rise in energy prices, which rebounded from Augusts 0.3% contraction, while food prices remained unchanged, the weakest reading since May.

Stripping out the volatile energy and food components, core consumer inflation (Core CPI), inched up 0.1% last month, the same as in August but below analysts expectations for a 0.2% advance. Year-on-year, core consumer prices rose by 1.7%, trailing both forecasts and last months 1.8% advance. The annual reading fell to a two-year low of 1.6% in June which was later followed by announcements from Fed officials who hinted for concern over deflation and its impact on the fragile economic recovery.

The U.S. dollar index, which measures the greenbacks performance against six major peers, fell by 0.06% to 79.63 at 13:23 GMT. Prices held in range between a session low of 79.52 that was hit after the release of ADPs statistics and days high of 79.76. The December contract added 0.4% on Tuesday but trimmed its weekly advance to less than 0.5% on Wednesday.

Elsewhere on the precious metals market, silver for delivery in December jumped by 2.39% to $23.030 per troy ounce by 13:25 GMT. The metal surged to a session high of $23.090 an ounce, the strongest level since October 19, after the release of todays data. Platinum futures for settlement in January rose by 1.11% to $1 478.20 an ounce after it previously climbed to a 7-week high of $1 479.90 per troy ounce. Palladium for delivery in December traded at $749.10 an ounce at 13:28 GMT, up 0.27% on the day. Prices held in range between days high and low of $750.60 and $743.30 per ounce respectively.