Gold futures rose Thursday to near $860 an ounce, as a weakening dollar raised the metal's investment appeal and as dismal U.S. jobs data increased safe-haven buying.
The dollar extended its losses against a basket of other major currencies after the Labor Department reported the number of people collecting benefits in the week ended Dec. 27 rose to the highest level in more than 26 years.
"It's expected that external factors will continue to be the main driver for gold," wrote economists at Action Economics. "Safe haven buying could feature on dips, with foreign exchange market volatility and geopolitical risk making gold a safer alternative investment."
Gold for February delivery was last up $18.30, or 2.2%, at $860 an ounce on the Comex division of the New York Mercantile Exchange. It fell in the previous session to close near $840 an ounce.
The number of people collecting benefits in the week ended Dec. 27 rose 101,000 to 4.61 million, the Labor Department reported Thursday. That was the highest level since November 1982. The four-week average of continuing claims rose 45,000 to 4.47 million, the highest level since December 1982.
The department also reported first-time applications for state unemployment benefits fell 24,000 to a seasonally adjusted 467,000 in the week ending Jan. 3. The drop in this week's data may be due to some layoffs occurring earlier than government analysts had expected, according to the Labor Department.
The dollar weakened after the jobs report, adding upward pressures on gold prices. The dollar index , which tracks the value of the greenback against other major currencies, was down 0.7% at 81.746.
Also weighing on the dollar, the Bank of England Thursday dropped its benchmark interest rate to the lowest level since the central bank's founding in 1694, as policy makers fired yet another salvo in the battle against a deep and potentially lengthy recession. See full story on BOE rate cut.
Sales data also heightened economic fears. Wal-Mart Stores Inc. , the world's largest retailer, posted lower-than-expected December sales and cut its fourth-quarter profit forecast. Other retailers such as Macy's Inc. and Gap Inc. also cut their outlooks. See full story on retailers.
In the Middle East, Israel's military was on increased alert on the northern border after morning rocket attacks from Lebanon raised the prospect that a second front could open in the country's current conflict. Read more on Middle East conflict.
Trading in other metals was mixed, with March copper down 2.5% at $1.4735 a pound and March silver almost flat at $11.10 an ounce. March palladium fell 0.2% to $200.20 an ounce, while April platinum rose 0.8% to $997.50 an ounce.
In gold spot trading, the London morning gold-fixing price -- a benchmark for gold traded directly between big institutions -- stood at $842.50 an ounce Thursday, down $21.50 from Wednesday.
Holdings in the SPDR Gold Trust, the largest exchange-traded gold fund, totaled 787.88 tons Wednesday, unchanged from a day earlier, according to the latest data from the fund. The SPDR Gold Trust ) added 1.9% to $84.35.
The Amex Gold Bugs Index , which tracks the share prices of major gold companies, rose 4.3% to 281.57.
The iShares Gold Trust exchange-traded fund rose 1.9% to $84.44, while the iShares Silver Trust ETF ) advanced 1.3% to $11.
The Market Vectors-Gold Miners ETF rose 4.1% to $31.27.
