Gold trades lower after U.S. jobless claims fell

Gold plunged to session low in late European trading on Thursday after the Labor Department reported that the number of people who applied for initial jobless benefits fell last week as California cleared a backlog of claims. Silver declined more than 4%, followed by platinum and palladium.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in December fell by 1.50% to $1 329.00 per troy ounce by 13:37 GMT. Prices plunged to a session low of $1 322.60 an ounce minutes after the report was released, the weakest level since October 22, and extended its weekly decline to over 1.6%.

The U.S. dollar was supported throughout the day as downbeat data from the Euro zone pressured the euro. The greenback drew further support after the Department of Labor reported that the number of people who filed for initial unemployment benefits in the week ended October 26 fell by 10 000 to 340 000, slightly underperforming the median estimate of analysts surveyed by Reuters for a drop to 339 000.

A Labor Department analyst said that California cleared its backlog of applications which caused distortions in numbers since September following a computer system change in the state.

The four-week average, which irons out weekly volatility, rose to 356 250 last week from 348 250. The average reading before the fiscal deadlock and the computer issues in California stood at 305 000 claims filed, indicating that the 16-day government shutdown in October had a negative impact on the labor market but the effects seemed to be diminishing.

The number of federal workers who filed for jobless benefits two weeks ago fell to around 14 400 from 44 100 in the preceding period. The people who are still receiving unemployment payments under regular state programs after the initial period jumped by 31 000 to 2.881 million in the week ended October 19. Continuing claims exclude those Americans who have exhausted their traditional aid and are receiving extended benefits under federal programs. Those people fell by 6 700 to 1.32 million in the week ended October 12.

Gennadiy Goldberg, U.S. strategist at TD Securities, said for Reuters: “We suspect that further improvement is likely as claims averaged roughly 330,000 before data collection issues began impacting the figures. This should continue to suggest that the underlying tone on the firing side of the labor market equation remains better, even as companies may be delaying new hires amid the ongoing uncertainty over the federal budget.”

The U.S. dollar index for December settlement rose by 0.30% to 80.01 by 13:38 GMT. The U.S. currency gauge jumped to a days high of 80.15, the strongest level since October 17, and extended its weekly advance to nearly 1%. Strengthening of the greenback makes dollar-denominated raw materials more expensive for foreign currency holders and limits their appeal as an alternative investment.

Todays data added to policy makers overall sentiment that the U.S. labor market and economy as a whole are still fragile and need to recover further but an underlying strength was notable. Fed officials seemed less optimistic about economic growth on Wednesday, and especially worried about the recovery of the housing and labor markets, pledging to maintain the current $85 billion per month bond purchasing pace until “the outlook for the labor market has improved substantially.”

However, policy makers noted there were signs of “underlying strength” in the economy and kept a tone which left the 16-day government shutdown in October and the possibility for a U.S. debt default on the sidelines, shifting focus to upcoming key data points. According to a Bloomberg survey of 40 analysts conducted on October 17-18, the Fed will begin scaling back its bond purchases in March. However, according to Citigroup the odds for tapering in January rose to 45% from 25% after FOMCs after-meeting statement. The precious metal has been tracking shifting expectations of Fed’s tapering timetable throughout the year and has lost 20% so far.

Elsewhere on the precious metals market, silver futures for settlement in December fell by 3.96% to $22.072 per troy ounce by 13:31 GMT. Prices plunged to session low of $21.810, the weakest level since October 21. Platinum for delivery in January traded at $1 457.65 per troy ounce, down 1.51% on the day. The metal varied in a days range between $1 474.30 and $1 454.90 an ounce. Palladium December futures slipped 0.57% to $745.20 by 13:36 GMT and held in range between $746.80 and $738.30 per troy ounce.