Gold prices edged higher Thursday as a surprise spike in U.S. unemployment claims and deteriorating business conditions in the manufacturing sector suggested a longer upside for the yellow metal in the near term.
Already on solid footing after the Fed's dovish stance a day earlier on interest rate cuts, gold was trading at $2,446 per ounce, a gain of $0.54. Further support for its longevity came amid a dip in Treasury yields and ramped-up geopolitical tensions in the Middle East conflict that threatens to expand into Iran.
Silver, meanwhile, was fighting to stay above the $28 level, dipping $0.58 to $28.47 per ounce.
The Department of Labor reported a surprise jump in initial unemployment claims for the week ending July 27, with 249,000 claims – an increase of 14,000 from the previous week's unrevised level of 235,000. The figures were higher than Wall Street estimates of 235,000 claims.
Additionally, the seasonally adjusted S&P Global U.S. Manufacturing Purchasing Managers' Index (PMI) fell to 49.6 last month from 51.6 a month earlier, suggesting an erosion in business conditions as new orders declined for the first time in three months. New business also decreased at the fastest pace this year.
"The manufacturing recovery moved into reverse in July, though the gloomier growth picture was accompanied by a marked cooling of inflation in the goods-producing sector," said Chris Williamson, the group's chief business economist. "Business conditions worsened in July as the first fall in new orders since April caused a near-stalling of production. Purchasing activity is falling, and hiring has slowed amid concerns over weaker-than-anticipated sales."
Gold surged in Wednesday trading after Federal Reserve Chairman Jerome Powell offered investors a dovish outlook of a possible September interest rate cut so long as current economic conditions held.
"If we were to see inflation moving down more or less in line with expectations, growth remains reasonably strong, and the labor market remains consistent with current conditions, then I think a rate cut could be on the table at the September meeting," Powell said after the Federal Open Market Committee concluded.
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