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Gold Prices Hit Intraday Lows After Positive U.S. Data

Investing.com - Gold prices hit intraday lows on Thursday after a bout of better-than-expected U.S. data took some of the wind out of hopes for aggressive policy easing from the Federal Reserve.

Gold futures for August delivery on the Comex division of the New York Mercantile Exchange, fell $2.45, or 0.2%, to $1,420.85 a troy ounce by 10:06 AM ET (14:06 GMT).

Following a similar move seen after strong retail sales on Tuesday, gold prices hit intraday lows after upbeat data from both the U.S. labor market and a regional reading of manufacturing activity.

Although the rise in weekly applications for unemployment subsidies matched consensus expectations, continuing jobless claims fell more than forecast, underlining the solid state of the labor market.

The Philadephia Fed manufacturing index also gave a show of strength, jumping much more than expected to a one-year high. That stands out particularly, given that the economic slowdown this year across the globe has been, first and foremost, a slowdown in manufacturing.

Positive economic data reduce the need for the Fed to take more aggressive action on policy easing.

Markets fully expect a quarter-point reduction to interest rates at the next meeting in two weeks, although there is some speculation that the Fed could cut by a larger 50 basis points.

The prospect of lower interest rates benefits gold as it lowers the opportunity cost of holding the non-yielding asset.

Neil Mellor, strategist at BNY Mellon, suggested that gold still had further to run given the generally dovish stance among central banks worldwide. The central banks of South Korea and South Africa both cut their key rates Thursday in response to economic weakness.

Analysts widely agree that the perception that the Fed has adopted an easing bias have kept gold well supported above the $1,400 psychological level.

“Those holding on to plans for policy normalization are the exception, not the rule – a fact that has indirectly contributed to an unprecedented and extraordinary pile of negative yielding debt which stands $12 trillion high,” he said.

“When we also consider the fact that central banks continue to build their reserves of gold (with buying at or around its highest in 50 years), the current, heady mix of support for gold presents itself as a possible precursor to something of long-term significance.”

In other metals trading, silver futures rose 1.0% at $16.128 a troy ounce by 10:08 AM ET (14:08 GMT).

Palladium futures fell 1.6% to $1,519.25 an ounce, while sister metal platinum gained 0.4% to $850.70.

In base metals, copper slipped 0.1% to $2.714 a pound.

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