Gold Prices Rise After Solid Economic Reports

NEW YORK ( TheStreet) -- Gold prices were climbing Thursday, coming off early session lows after a round of U.S. economic indicators reported steady improvement in the housing and labor markets. Gold dropped 70 cents, or 0.04%, on Wednesday.

Gold for February delivery was adding $4.30 to $1,687.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,689.70 and as low as $1,666.40 an ounce, while the spot price was adding $8.10.

Gold prices on the Comex division slumped at the opening of the market, but have moved into positive territory in the first couple hours of trading.

"Principally today, anyway, the better economic reports that came out of the U.S. helping the dollar, pushing down gold a little bit," said Will Rhind, managing director at ETF Securities U.S. "We've come off that low as people have stepped in to buy it."

The U.S. dollar index was sliding 0.14% to $79.70, while silver prices for March delivery were tacking on 15 cents to $31.70 an ounce.

Housing starts rose in December to 954,000 on a seasonally adjusted annual rate, up from November's revised 851,000, according to the Census Bureau. The Labor Department reported that initial jobless claims for the week ended Jan. 12 decreased to 335,000, which also brought the four-week moving average down to 359,250.

The improving housing market has suggested greater health in the overall economy, which would suggest a move out of gold -- a safe-haven against inflation and economic uncertainty -- and into other assets. Employment reports have exhibited significant sway on the yellow metal as the Federal Reserve has tied much of its monetary policy to strength in the labor market. The Fed has reiterated its commitment to continue low federal funds rates and quantitative easing measures for as long as the labor situation exhibits soft improvement.

Gold has struggled to break out of its current trading range, which may be a result of major economies -- the eurozone, China, the United States -- beginning to reach some certainty in terms of expansion.

"Gold is a pure commodity. It doesn't offer a dividend, there's no earnings associated with it, and so it is really supply and demand driven," said Paul Pagnato, founder of HighTower's Pagnato-Karp Group. "What we're seeing now is the central banks have their act together; they're all coordinated, they're all in line with one another, and the economies are starting to heal."

Gold, though, has been overshadowed this week by the platinum trade, as the white precious metal reached parity and surpassed gold prices.

Platinum prices were adding $7.20 to $1,701.30 an ounce on Thursday. Platinum has seen a significant move up as demand in the United States and China -- the prime source of demand comes from catalytic converters on cars -- and as supply from South Africa (the world's largest producers) has dwindled.

And if precious metals traders are considering whether to continue to ride the recently volatile gold trade, or the surging platinum exchange, ETF Securities U.S.'s Rhind suggested the better play may be the latter.

"These are not short-term problems; we're talking about their structural problems in South Africa, which is the largest producer. They're not things that can be resolved quickly, and I think these problems are certainly going to be here for some time," said Rhind.

Europe reported no major economic reports on Thursday, but the euro was posting gains to snap its losing streak. The euro was gaining to $1.3357 against the U.S. dollar, which was up from the prior day's close at $1.3289.

Gold mining stocks were mostly lower on Thursday. Shares of Eldorado Gold ( EGO) were off 0.77%, and shares of Kinross Gold ( KGC) were losing 0.75%

Among volume leaders, Barrick Gold ( ABX) was down 0.08%, as Yamana Gold ( AUY) was decreasing 0.28%.

Gold ETF SPDR Gold Trust ( GLD) was adding 0.43%, while iShares Gold Trust ( IAU) was climbing 0.37%.

-- Written by Joe Deaux in New York.

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