Gold Rallies on Jobs News

Updated from 11:55 a.m. EST

Gold prices surged again Thursday, as the dollar slid on news of an unexpectedly large jump in U.S. jobless claims and a sluggish reading on the factory sector.

Contracts for February delivery of bullion rose $11.10 to $652.90 an ounce on the Comex division of the Nymex. The exchange-traded funds that hold gold stocks also rallied, with streetTracks Gold Shares (GLD Quote) and iShares Comex Gold Trust(IAU Quote) both up about 1.9%.

The surge in gold comes as the dollar traded lower, following the spike in unemployment claims and an unexpectedly weak Chicago purchasing managers index report. The dollar was buying 115.8 yen, down from 116.41 yen. It was also sharply lower against the euro trading at $1.3243 vs. $1.3146 previously.

Gold prices tend to move in the opposite direction to changes in the value of the U.S. currency.

The selling in the dollar was prompted by the Labor Department saying that new claims for unemployment insurance jumped to 357,000 last week, compared to a revised figure of 323,000 for the prior week. Forecasters had been expecting a figure of 316,000. Separately, the Chicago PMI for November fell to 49.9, from 53.5 in October, which was well below consensus expectations of 54.5.

Both economic figures provided more evidence of a slowing economy.

Also boosting gold were renewed concerns that tensions may heighten in the Middle East. Investors tend to rally to precious metals like gold when they are concerned about geopolitical issues.