Gold Surges on Inflation Fears

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By Jacob Maslow

Gold futures soared more than $20 an ounce as poor economic data weighed on the dollar, ahead of Janet Yellen’s first public appearance since the Federal Reserve on Thursday night held short term interest rates at its present near-zero degree last week.
On the Comex division of the New York Mercantile Exchange, gold for December delivery soared as high as $1,156.00 a troy ounce, its highest level since late-August, before closing at $1,152.80, up $21.30 or 1.88%. The precious metal also have its strongest one day move in more than a month. Gold is now up approximately 2% since the beginning of September.

Gold probably developed support at $1,098.20, the low from Sept. 11 and was met with opposition at $1,169.00, the high from Aug. 24.

On Thursday morning, the U.S. Department of Commerce said new orders for manufactured durable goods in August decreased $4.8 billion or 2.0% to $236.3 billion. Following two months of gains, analysts expected durable good orders to fall by 2% last month. Weakness in aircraft orders weighed heavily on the reading, plummeting by 12% in August. Durable goods remained unchanged from its July level, when transportation orders are excluded.
Individually, the Kansas City Fed said manufacturing activity in its region for September fell at a comparable rate to the previous month, underscoring export weakness from a stronger dollar and reduced production in the energy sector due to lower petroleum prices. The Kansas City Manufacturing Index created a reading of minus-8 in September, improving only slightly from an August reading of minus-9.
Initial jobless claims, nonetheless, remained near record-lows after ticking up by just 3,000 for the week ending on Sept. 12 to 267,000. Analysts expected jobless claims to drop in a range between 269,000 to 280,000. Continuing claims, meanwhile, dropped to 2.242 million, down by 25,000 in comparison with the sample week from August. The Federal Open Market Committee is likely to keep a close eye on slack in the labor market when the September national employment report is released in fourteen days. While average hourly earnings in August inched up by 0.3%, real or inflation-adjusted wages remain near 2009 levels during the recession.
Yellen, the Fed chair, is scheduled to speak on inflation dynamics and monetary policy during an appearance in the University of Massachusetts-Amherst on Thursday eve. Last week, the FOMC held its benchmark Federal Funds Rate at its present amount between zero and 0.25% for the 55th consecutive meeting. Almost a decade has passed since short-term interest rates have been increased. Gold, which is not attached to interest rates or dividends, struggles to compete with high-return bearing assets when rates are increasing.
The U.S. Dollar Index, which measures the strength of the dollar versus a composite of six other major currencies, dropped more than 0.5% to an intraday low of 95.58. On Wednesday, the index soared above 96.70, reaching its highest level in more than a month.
Silver for December delivery rose 0.341 or 2.31% to 15.130 an ounce.
Copper for December delivery gained 0.005 or 0.23% to 2.300 a pound.

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