Gold futures on Thursday flirted with two-month highs after another round of weak economic data added to bullion's appeal against riskier assets. "Today's U.S. reports helped to confirm that the pace of economic decline is diminishing, but with modest headline disappointments for the Philly Fed and initial claims reports that signal a rocky road toward recovery through (the second quarter)," said analysts at Action Economics. June gold was lately up $3.40, or 0.4%, at $940.80 an ounce. Copper for July delivery lost 0.078 cents, or 3.7%, to $2.027 a pound. The U.S. index of leading economic indicators climbed 1% in April from a revised 98 in March. A measure of manufacturing activity in the Philadelphia region showed a contraction, but also pointed to a further diminishment of the downward trend. The reports followed another reminder of the bleak state of the labor market. The Labor Department's count of continuing jobless claims hit a record high, nearing 6.7 million, in the week ending May 9. First-time claims fell by 12,000 to a seasonally adjusted 631,000 in the week ended May 16. Read Economic Report. Analysts said auto-producing states were hardest hit in the wake of the industry's troubles, with Chrysler and General Motors Corp. both ramping down business. "The disruptions in the auto market are clearly having an effect on the labor market and will continue to do so as GM continues its inevitable march towards bankruptcy. As notices go out to Chrysler and GM dealerships, about 2000 between them, a fair amount of fluctuation is going to be seen in the weekly claims figures," Dan Greenhaus, an analyst at Miller Tabak & Co., wrote in an emailed note. The dollar index , which tracks the greenback against a trade-weighted basket of six major currency rivals, fell nearly 0.3% to stand at 81.202. Read Currencies. One analyst questioned the idea that a falling dollar always translates into higher gold prices. "If the green shoots turn brown and fall off, the dollar could quickly become the safe-haven of choice for those seeking shelter," said Jon Nadler, senior analyst, Kitco Metals Inc., which tracks the greenback against a trade-weighted basket of six major currency rivals, fell nearly 0.3% to stand at 81.202. Read Currencies. One analyst questioned the idea that a falling dollar always translates into higher gold prices. "If the green shoots turn brown and fall off, the dollar could quickly become the safe-haven of choice for those seeking shelter," said Jon Nadler, senior analyst, Kitco Metals Inc.

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