Gold jumps to 1-month high on disappointing jobless claims

Gold surged to the highest in more than a month after the U.S. Labor Department reported on Thursday that the number of people who filed for initial jobless payments last week exceeded analysts expectations, fueling speculations the Federal Reserve will refrain from scaling back its bond purchases this year. The U.S. trade deficit was little changed, signalling a stalling global economic activity. Silver, platinum and palladium tracked the yellow metals upward momentum.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December traded at $1 340.80 per troy ounce at 13:01 GMT, up 0.51% on the day. Prices climbed to a session high of $1 348.90 per troy ounce minutes after the release of the data, the strongest level since September 20, while days low stood at $1 330.40 per ounce. The precious metal fell by 0.5% on Wednesday but extended its weekly decline to over 1.9% on Thursday.

Gold extended positions after the Labor Department reported today that the number of people who filed for initial unemployment benefits in the week ended October 19 fell by 12 000, underperforming the median estimate of 48 economists surveyed by Bloomberg for a fall to 340 000. The preceding periods reading received and upward revision to 362 000 from initially estimated at 358 000. The four-week average, which irons out weekly volatility, rose to 348 250 from 337 500 in the previous week.

A spokesman of the government agency said that applications in California remained elevated after the state continued to work through a backlog of data last week amid an earlier computer issue. The department also wasnt able to determine how many non-federal workers who were furloughed during the 16-day government shutdown applied for jobless benefits. Claims filed by federal employees declined by 25 939 in the week ended October 12.

The number of people who continued to receive unemployment payments fell by 8 000 to 2.874 million in the week ended October 12, beating predictions for a 7 000 decrease. That number does not include the beneficiaries of extended payments under federal programs.

Guy Berger, an economist at RBS Securities Inc. in Stamford, Connecticut, said for Bloomberg before the report: “California and the shutdown are still going to be elevating claims numbers. Layoffs are going to subside once we head to the very end of the year. It’s really a question of whether hiring can pick up.”

The U.S. Department of Labor reported on Tuesday that the U.S. economy added 148 000 jobs in September, sharply underperforming a median forecast of 93 economists surveyed by Bloomberg for a 180 000 surge. August’s reading received an upward revision to 193 000 payrolls from initially estimated at 169 000, signalling that the U.S. labor market lost momentum prior to the 16-day government shutdown.

The U.S. unemployment rate, based on a separate Labor Department survey of households, fell by 0.1% to 7.2% in September, beating expectations to remain flat. However, the participation rate, which measures the number of people who are either employed or are actively looking for work, remained the lowest since August 1978 at 63.2%.

According to a Bloomberg survey of 40 analysts conducted on October 17-18, the Fed will begin decelerating its monetary stimulus in March. The yellow metal has been tracking shifting expectations for a reduction in Fed’s bond purchases throughout the year and has lost 20% so far in 2013.

A separate report showed that the U.S. trade deficit was little changed in August as imports and exports stalled, signalling a loss of momentum in global economic activity. The deficit widened to $38.803 billion in August, beating projections for a surge to $39.300 billion. Julys reading received a downward revision to $38.642 billion from initially estimated at $39.147 billion.

The U.S. dollar index, which measures the greenbacks performance against a basket of six major currencies, traded at 79.32 at 13:00 GMT, down 0.03% on the day. The December contract plunged to a session low of 79.14, the weakest level since September 2012, while day’s high stood at 79.37. The U.S. currency gauge added less than 0.1% on Wednesday and extended its weekly decline to 0.5% on Thursday.