Gold also finds support after S&P downgrade of Spain’s debt
By Polya Lesova and Carla Mozee, MarketWatch
LOS ANGELES (MarketWatch) — Gold futures advanced Thursday, with weakness in the U.S. dollar offsetting better-than-expected data that showed improvement in the U.S. labor market.
Gold for December delivery GCZ2 +0.30% rose $9.10, or 0.5%, to $1,774.00 an ounce on the Comex division of the New York Mercantile Exchange, climbing back near the level the contract had been before the release of data from the Labor Department.
The government said the number of initial claims in the week ending Oct. 6 fell 30,000 to 339,000, defying expectations for a rise. The four-week average also declined. See: Jobless claims plunge to four-year low.
Good economic news, such as the figures from the Labor Department, is likely to weigh on gold prices because it encourages appetite for riskier assets.
But gold found upside support from “the risk of the euro-zone debt crisis intensifying with the focus again on Spain after S&P cut Spain’s rating to just above junk status,” said Mark O’Byrne, executive director at Goldcore, in emailed comments.
Gold is seen as a safe-haven investment that investors tend to buy at times of economic and financial uncertainty.
The two-notch downgrade of Spain’s debt to BBB- came late Wednesday, and the move could push the country toward asking for a bailout. See: S&P downgrade may nudge Spain bailout along.
The euro managed to climb 0.7% against the dollar to $1.2943 in the wake of the downgrade of Spanish debt. See: Euro takes Spain downgrade in stride.
Weakness in the dollar usually buoys dollar-denominated commodities such as gold and oil because it makes them cheaper for holders of other currencies.
The dollar index DXY -0.40% , which measures the greenback against a basket of six rivals, fell to 79.740 from 80.058 in late trading Wednesday.
O’Byrne highlighted a warning from the International Monetary Fund that the euro-zone debt crisis could worsen unless swift action is taken by political leaders, and the IMF’s warning that the U.S. and Japan have made little progress in handling their budget deficits.
“This is one of the fundamental factors leading to robust demand for gold as seen in the significant inflows into gold exchange-traded funds in recent weeks,” he said. See: Inflows to gold ETPs surge.
“The appalling fiscal situation throughout the Western world means that record new gold prices are only a matter of time,” said O’Byrne,“and the inflation adjusted high of $2,400/oz should be reached in the first half of 2013.”
In other metals trade, December silver futures SIZ2 +0.05% gained 16 cents, or 0.2%, to $34.26 an ounce.
Polya Lesova is MarketWatch's New York deputy bureau chief.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles.
