Further gains were seen in gold on Thursday as the metal traded at a spot price $1151.88 per ounce during the North American session. The US unemployment claims fell to 285 000, disappointing economic news. Preliminary Unit Labor Costs showed a strong increase of 4.5%. This was well above what had been expected. The US Factory Orders however, fell 2.9% below expectations.
The gold prices have moved higher over the past week and are now above $1150 for the first time since October. The market turmoil in the early 2016 due to the Chinese slowdown, and the collapse in oil prices has been good news for gold. The metal gained 5.3% in January, and is now up 3.3% in February’s first week. The US data this week was weak and gold has risen against the dollar. ADP Nonfarm payrolls fell to 205 000 in January from 257 thousand one month earlier. ISM Non-Manufacturing PMI was worse, which is a key indicator of the sector’s services sector. In January, the index fell to 53.2 points, its lowest point since March 2014. Unemployment Claims rose by 285 thousand on Thursday, exceeding expectations of 279 000. The official Nonfarm payrolls report concludes the week. The markets are expecting a sharp fall in the readings, which could cause the markets to react negatively and push gold prices higher.
Is the US economy in crisis? Many market players are asking this key question because of the lukewarm US figures that have characterised the first month 2016. The Federal Reserve raised interest rates in December due to strong growth and a robust labor force in the second half 2015, but due to changes in the economic climate, the Fed decided to delay another rate increase in January and instead issue a cautious policy statement. It is unlikely that the Fed will increase rates in March if inflation and employment numbers don’t improve quickly. There was talk in the heyday of the Fed’s historic rate increase that there would be four rate increases in 2016. However, this seems unlikely given current economic conditions.