Gold Prices Settle Higher

Gold prices settled higher in trading on Thursday, gaining for a fifth day in a row as weak economic data in the U.S. raised prospects of further monetary easing from the Federal Reserve.

A report released by the Labor Department showed that initial jobless claims rose unexpectedly to 386,000 last week. Meanwhile, consumer prices fell 0.3% in the month of May. The weaker than expected economic data has once again raised hopes of monetary easing.

Speaking to Reuters, James Steel, metals analyst at HSBC, said that the data out on Thursday reignited the possibility of further U.S. easing and that is supportive to gold. Steel said that the market has been characterized with a lot of volatility due to market speculations about Federal Reserve monetary easing.

Gold was also lifted by ongoing worries over the euro zone debt crisis. On Thursday, yields on 10-year Spanish bonds surged to a euro-era high. Italian borrowing costs also rose sharply on Thursday. The upcoming Greek election is also keeping investors on edge.

Commenting on the impact Greek election could have on gold, RBS analyst Nikos Kavalis told Reuters on Thursday that the result of the vote will be very important not just to gold but across the whole financial markets next week. Kavalis said that if we get a disappointment, we can expect a massive sell-off across the board, but if we get a good result we wont necessarily have a massive rally.

With the ongoing turmoil in the euro zone, even German Bund, considered a safe have asset, is coming under pressure. In a research note, UBS said that German bund yields have been rising, behaving more like periphery bonds rather than safe haven. UBS said that spread versus UK gilts has narrowed substantially this week.

UBS said that while it is too early to conclude that German bunds are losing their safe haven status, such a scenario would mean investors would be on the lookout for new secure places to park their money.

Spot gold rose 0.45% to $1,624.39 an ounce. Gold futures for delivery in August on the Comex division of the New York Mercantile Exchange settled $0.20 higher at $1,619.60 an ounce.

Gold prices have risen nearly 2% so far this week on monetary easing hopes. Physical demand for gold also remains robust, especially from China. The world’s second largest economy is set to overtake India as the biggest consumer of gold.

Earlier this week, Kazakhstan’s central also said that it plans to increase the share of gold in its currency reserve. The move from the Kazakh central bank has fueled speculation that other emerging market economies will also boost their gold reserves due to risks in major reserve currencies.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.39% higher at $157.75, the Market Vectors ETF Trust (NYSE: GDX) ended the day 0.26% higher at $46.93, and the iShares Gold Trust (ETF) (NYSE: IAU) ended the day 0.38% higher at $15.83.

In other precious metals, silver fell sharply on Thursday. At last check, spot silver was down 1.04% to $28.63 an ounce.

The iShares Silver Trust (ETF) (NYSE: SLV) ended the day 0.68% lower at $27.82, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) ended the day 1.32% lower at $41.75.

The ProShares UltraShort Silver (ETF) (NYSE: ZSL), which takes a short position on silver, ended the day 1.38% higher at $63.13.

Platinum group of metals rose sharply on Thursday. At last check, spot platinum was trading 2.18% higher at $1,491.24 an ounce, and spot palladium was trading 2.29% higher at $631.47 an ounce.

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.