A soft dollar and the emergence of fund buying helped gold break through the psychologically important level $600 an ounce level Thursday.
Weaker-than-expected data came from the Philadelphia Federal survey, which had a reading of minus 0.7 compared to forecast of 6.5, and the Conference Board's index of leading economic indicators, which rose 0.1% in September vs. forecasts for a 0.3% gain. The data provided enough evidence of a weakening economy to put pressure on the U.S. dollar, despite a separate report from the Department of Labor showing weaker-than-forecast claims for unemployment benefits. The actual figure of was 299,000 new claims vs. a 310,000 forecast, and 309,000 in the prior period, showing contrary evidence that the U.S. economy remains relatively robust.
But it didn't make enough difference to currency traders who went with the bear case and marked down the greenback. The dollar was recently buying 118.635 yen vs. 118.92 yen late Wednesday. It was also weaker compared to the euro, which was recently trading at $1.2565 compared to $1.2534.
The foreign exchange action gave a boost to gold, which often tends to move inversely with the price of the dollar; gold with contracts for December delivery of bullion closed up $10 at $602.60 an ounce on the Comex division of the New York Mercantile Exchange.
Also helping the yellow metal was positive sentiment among institutional investors.
"Fund buying took gold over the $600 level," says Bernard Hunter, director of precious metals at Toronto-based bullion bank ScotiaMocatta. "But to our mind the move was a bit overdone."
Others note the two-way (up/down) struggle that the yellow metal has been locked in recently, from which any lasting breakout has failed to materialize.
"Demand news outside of the U.S. might be serving to support prices, while the macro economic/oil focus in North America looks to continue to be a drag on gold prices," writes Ben Mancha, an analyst at NS Futures in a daily report.
The session's generally positive sentiment spilled over into the mining equities with the Amex Gold Bugs Index rallying 3.6% recently, helped most by component stocks of
, up 4.7%, and
Golden Star Resources
up 5.7%. The bullion exchange traded funds,
iShares Comex Gold Trust
streetTracks Gold Shares
, were lifting also, up about 1.5% each recently.
Silver prices were bouncing also, with Comex December contracts gaining 34 cents to close at $12.16 an ounce. That helped buoy shares of the silver producers,
Coeur d'Alene Mines
, were recently up 4.4% and 6.6% respectively.
"I think we could see silver climb to $12.60," says James Moore, an analyst at
, who adds that the white metal could take its lead from strong markets for industrial metals.
In base metals, Comex December copper contracts closed up 1.35 cents at $3.5095 a pound.