Forexpros – Gold futures were up during U.S. morning hours on Thursday, rallying to the highest levels of the session as the release of disappointing U.S. jobless claims numbers and softer-than-expected inflation data triggered hopes for a third round of monetary easing by the Federal Reserve.
The precious metal found further support from some safe haven inflows as investors remained jittery over surging borrowing costs in Spain and Italy and ahead of weekend elections in Greece, which could determine the course of the country’s future in the euro zone.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,627.55 a troy ounce during U.S. morning trade, gaining 0.5%.
It earlier rose by as much as 0.6% to trade at USD1,628.85, the highest since June 7.
Gold futures were likely to find support at USD1,559.35 a troy ounce, the low from June 8 and near-term resistance at USD1,642.15, the high from June 6.
Gold futures rallied to the highest levels of the session after the U.S. Department of Labor said the number of people who filed for unemployment assistance in the U.S. last week unexpectedly increased to 386,000, against expectations for a decline of 5,000 to 375,000.
The previous week’s figure was revised up to 380,000 from a previously reported 377,000.
A separate report showed that U.S. core consumer price inflation rose 0.2% in May, bringing the annualized rate of inflation to 2.3%, broadly in line with expectations.
Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.
Consumer prices including food and energy costs fell 0.3% last month, the sharpest monthly fall since December 2008. Consumer prices increased at annualized rate of 1.7% last month, slowing sharply from 2.3%.
The weak data added to expectations that the Federal Reserve may implement a third round of easing to shore up economic growth after Chicago Fed President Charles Evans reiterated his support for additional monetary stimulus on Tuesday.
Expectations of monetary stimulus tend to benefit gold, as the metal is seen as a safe store of value and inflation hedge.
The renewed easing hopes weighed on the U.S. dollar. The dollar index was down 0.15% to trade at 82.46, reversing earlier gains of as much as 0.2%.
Gold investors will be closely watching U.S. data in the second quarter for clues as to the likelihood of a fresh round of monetary easing, which could potentially hurt the dollar and support gold.
Gold gained as much as 15% earlier this year to hit USD1,790 an ounce after the Fed said in January it would keep interest rates near zero until at least late 2014 and indicated that it could introduce a fresh round of asset-purchases.
However, prices have lost almost 9% since late February, amid growing concerns the European debt crisis has been escalating, which has fueled demand for the yellow metal’s hedge, the greenback.
Meanwhile, some safe haven buying further supported the yellow metal, after yields on Spanish 10-year bonds rose to a euro-lifetime high of 6.99% earlier.
Late Wednesday, ratings agency Moody’s downgraded Spain’s sovereign-debt rating to Baa3 from A3, while placing the country on review for a possible further downgrade.
Concerns that Italy may be the next euro zone country to require a bailout intensified earlier after the country sold the maximum targeted amount of EUR4.5 billion of government bonds, but the country’s three-year borrowing costs jumped to the highest level since December.
Investors were also jittery ahead of Sunday’s general election in Greece, which could determine the country’s future in the euro zone.
Elsewhere on the Comex, silver for July delivery shed 0.25% to trade at USD28.87 a troy ounce, while copper for July delivery dipped 0.1% to trade at USD3.336 a pound.
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