Gold Plummets On Upbeat Data, Strong Dollar

(RTTNews) - Gold futures plummeted to end sharply lower on Thursday, after some upbeat economic data showed first-time claims for unemployment benefits in the U.S. declined more than expected while eurozone economic confidence rose to a six-month high.

Investors also weighed the Federal Reserve's monetary policy announcement yesterday. As was widely expected, the Fed left interest rates unchanged, reiterating its pledge to remain patient in its efforts to normalize monetary policy. The Fed upgraded its assessment of the economy, indicating economic activity has been expanding at a solid pace since its December meeting.

The Federal Reserve said, "Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy." The statement suggests the Fed is unlikely to raise interest rates until at least June, but probably later.

A stronger dollar has also weighed on gold, even as the euro also rebounded to trade higher on some upbeat economic news from the eurozone with German unemployment ate declined to a record low.

In an encouraging sign for the economy, a report from the U.S. Labor Department on Thursday showed first-time claims for U.S. unemployment benefits dropped to their lowest level in over fourteen years in the week ended January 24.

Gold for April delivery, the most actively traded contract, plunged $31.30 or 2.5 percent, to settle at $1,255.90 an ounce on the Comex division of the New York Mercantile Exchange on Thursday.

Gold for April delivery scaled an intraday high of $1,286.60 and a low of $1,252.10 an ounce.

On Wednesday, gold ended lower at $1,285.90 an ounce, down $5.82 or 0.4 percent, ahead of the outcome from the two-day Federal Reserve policy meet with the dollar trending higher against a select band of currencies.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at 752.70 tons on Thursday from its previous close of 743.44 tons.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 94.82 on Thursday, up from its previous close of 94.63 late Wednesday in North American trade. The dollar scaled a high of 95.01 intraday and a low of 94.33.

The euro trended higher against the dollar at $1.1309 on Thursday, as compared to its previous close of $1.1286 late Wednesday in North American trade. The euro scaled a high of $1.1368 intraday and a low of $1.1262.

In economic news from the U.S., the Labor Department said initial jobless claims tumbled to 265,000, a decrease of 43,000 in the week ended January 24, from the previous week's revised level of 308,000, This is the lowest level in over fourteen years. Economists expected claims to dip to 300,000 from the 307,000 originally reported for the previous week. Jobless claims was at its lowest level since hitting 259,000 in the week ended April 15, 2000.

Partly reflecting fewer homes available for sale and a slight acceleration in prices, a report from the National Association of Realtors on Thursday showed an unexpected sharp drop in U.S. pending home sales in December. NAR said its pending home sales index tumbled 3.7 percent to 100.7 in December, while rising 0.6 percent to a slightly downwardly revised 104.6 in November. Economists expected the index to climb by 0.5 percent.

From the eurozone, Germany's consumer prices in January declined for the first time in nearly five-and-a-half years at faster than expected rates, in sync with the forecast for deflation in the euro area, preliminary data from Destatis showed Thursday.

Germany's unemployment rate declined to a record low at the start of the year, reflecting an improvement in the labor market, expanding the most in three years during 2014. The jobless rate dropped to a seasonally adjusted 6.5 percent in January from a revised 6.6 percent in December, the Federal Labor Agency reported Thursday. That was in line with economists' forecast.

The EU measure of inflation, the harmonized index of consumer prices, fell 0.5 percent annually, following a modest 0.1 percent gain in December. Economists had forecast a 0.2 percent decline. This was the first fall in the HICP since October 2009, when prices dropped 0.1 percent, and the biggest since the 0.7 percent slump in July 2009.

Meanwhile, eurozone economic confidence strengthened to a 6-month high in January, on marked increases in consumer and retail trade confidence, survey data from the European Commission showed Thursday. The economic confidence index rose to 101.2, the highest since July, from 100.6 in December. It was forecast to rise to 101.6.

Elsewhere in Europe, U.K. retailers reported robust January sales and anticipate firm growth in February, the latest monthly Distributive Trades survey from the Confederation of British Industry showed Thursday. About 50 percent of retailers said sales volumes were up in January, while 10 percent said they were down, giving a rounded balance of +39 percent. The balance exceeded the consensus estimate of +32 percent.

U.K. house prices continued to increase at a faster rate in December, rising 0.6 percent month-on-month in December after rising 0.1 percent in November, data published by the Land Registry showed Thursday.