Gold advances following mixed U.S. data

Gold extended positions in the early U.S. session as the dollar plunged following mixed U.S. economic data which showed an increase in durable goods orders and disappointing labor data.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at $1 325.75 an ounce at 14:08 GMT, up 0.47% on the day. Prices ranged between days high and low of $1 326.85 and $1 308.75. The precious metal has advanced 2.3% so far for the week despite an 1.85% decline on Wednesday.

Gold edged higher on Thursday as the U.S. dollar plunged following mixed economic data. The Commerce Department reported that Junes Durable Goods Orders equaled 4.2%, surpassing expectations for a decrease to 1.4%. Mays reading was revised upwards to 5.2% from 3.6%.

Meanwhile, Durable Goods Orders ex Transportation, which exclude the more volatile automobile sales, disappointed and fell to 0.0%, below Mays upwards revised reading of 1.0% and projections for a fall to 0.5%. Durable Goods Orders ex Defense also underperformed the previous month, but were well above projections. The indicator fell to 3.0% from Mays upwards revised figure of 4.9% but exceeded expectations for a decline to -0.9%.

Despite the overall positive durable goods orders indicators, the U.S. dollar remained pressured and retreated as negative sentiment from the disappointing labor data weighed on the currency. The U.S. Labor Department said in a separate report that during the week ending July 20, 343 000 people have filed for initial unemployment payments, 3 000 more than analysts predicted and 7 000 more than the preceding week.

The negative data dampened speculation that Fed will start decelerating its monetary easing program soon, thus pushing the dollar down. The dollar index, which measures the greenbacks performance against six major counterparts plunged to 82:20 at 14:08 GMT, down 0.21% on the day. The September contract ranged between days high of 82.50 and low at 82.10, which was hit minutes after the data was released. The U.S. currency gauge advanced 0.33% on Wednesday after a batch of positive U.S. data but is posting a 0.65% weekly decline so far after it tumbled 2.3% during the preceding two.

The greenback tends to trade inversely to dollar-denominated raw materials. Weakening of the currency makes dollar-priced commodities cheaper for foreign currency holders and boosts their appeal as an alternative investment.

Gold fell 21% this year and is poised to mark its first annual decline after advancing for 12 years following Federal Reserve’s intentions to trim its monetary easing program in the upcoming months. The yellow metal has mainly been tracking shifting expectations for an earlier-than-expected deceleration of Fed’s Quantitative Easing program. Signs of a consistent recovery of the U.S. economy reduce the need for the central bank to ease money supply, thus reducing demand for gold as a hedge. Ben Bernanke stated at his latest testimony before Congress the U.S. economy currently needs the central bank’s accommodative monetary policy in the foreseeable future and it can even be accelerated, if recovery slows its pace. However, Bernanke supported Fed’s view that Quantitative Easing is still expected to be tapered within the year and brought to an end by mid-2014, if the requirements are fulfilled.

Elsewhere on the precious metals market, silver gained, while platinum and palladium marked daily losses. Silver for September delivery traded at $20.158 an ounce at 14:04 GMT, up 0.69% on the day. The metal ranged between days high and low of $20.210 and $19.763 respectively. Meanwhile, platinum October futures fell to $1 445.95 an ounce, down 0.64% for the day. Prices held in range between $1 448.45 and $1 428.90. Palladium for September delivery stood at $743.30 per troy ounce, marking a 0.27% loss. The metal varied between high and low at $749.80 and $734.20 an ounce respectively.