Gold Rises as U.S. Data Adjust Interest-Rate Expectations

New York (Aug 14)  Gold prices edged higher Thursday, as recent shortfalls in U.S. data bolstered the case for a slowdown in the country's economic recovery.

Gold for December delivery closed up $1.20, or 0.1%, at $1,315.70 a troy ounce on the Comex division of the New York Mercantile Exchange. Earlier in the session, prices fell to a low of $1,310 an ounce.

New applications for unemployment benefits rose last week to a seasonally adjusted 311,000 in the week ended Aug. 9, more than the 295,000 forecast by economists. The data come on the heels of weak retail sales for July reported Wednesday, which showed that consumer spending, a key driver of the economy, has slowed.

The reports renewed expectations that the first increase in U.S. interest rates since 2006 was still far away. Investors have been seeking clues about when the Federal Reserve make a move and, until this week, recent data had reinforced fears that a solid U.S. recovery would push the central bank to tighten monetary policy sooner than expected. Gold costs money to own and struggles to compete with yield-bearing investments in times of higher rates.

"Just a few weeks ago, strong GDP and jobs numbers made it look like the economy was firmly on track," said James Cordier, a principal at Liberty Trading. "Ever since then, though, there has been little follow through."

Capping gold's gains Thursday was a report from the World Gold Council showing global demand for gold slumped by 16% in the second quarter, as Indian and Chinese buying subsided after a record-breaking quarter a year ago.

China and India, which together account around half of global gold demand, purchased 193 metric tons and 204 tons of gold, respectively, in the second quarter, down from a year ago when low gold prices spurred buying in Asia. The WGC said the governments of China and India made decisions that put people off buying gold in the three months ended June.

Source: WSJ