Gold rallies to 5-week high after existing home sales data

Investing.com - Gold prices rose to the highest levels of the session on Thursday, hitting a five-week top, after data showed that U.S. existing home sales rose less-than-expected in December.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,263.20 a troy ounce during U.S. morning hours, up 2%.

Gold prices rose by as much as 2.1% earlier in the session to hit a daily high of USD1,263.60 a troy ounce, the strongest since December 10.

The February contract settled down 0.26% on Wednesday to end at USD1,238.60. Futures were likely to find support at USD1,227.00 a troy ounce, the low from January 10 and resistance at USD1,267.30, the high from December 10.

Meanwhile, silver for March delivery jumped 2.15% to trade at USD20.26 a troy ounce. Comex silver prices slumped by 0.95% earlier to hit a daily low of USD19.64 a troy ounce, the weakest level since January 10.

The March contract ended Wednesday’s session down 0.16% to settle at USD19.83 a troy ounce.

The National Association of Realtors said earlier that existing home sales increased 1% to a seasonally adjusted 4.87 million units in December from 4.82 million in November. Analysts had expected U.S. existing home sales to rise to 4.94 million units in December.

The report came after Markit said that its preliminary U.S. manufacturing purchasing managers’ index declined to a three-month low of 54.3 this month from a final reading of 55.0 in December.

Also Thursday, the U.S. Department of Labor said that the number of individuals filing for initial jobless benefits in the week ending January 18 increased by 1,000 to a seasonally adjusted 326,000 from the previous week’s revised total of 325,000.

Continuing jobless claims in the week ended January 11 rose to 3.056 million from 3.022 million in the preceding week. Analysts had expected continuing claims to fall to 2.930 million.

Gold and silver prices have been under pressure in recent sessions amid expectations that the Federal Reserve will continue tapering its stimulus program at the outcome of its next policy meeting on January 29 to USD65 billion from the current USD75 billion.

A weaker U.S. dollar also contributed to gains. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.8% to trade at 80.67, the lowest since January 14.

Dollar weakness usually benefits gold and silver, as it boosts the metals’ appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

Elsewhere on the Comex, copper futures for March delivery fell 0.1% to trade at USD3.335 a pound. Comex copper prices hit a session low of USD3.305 a pound earlier, the weakest level since January 10.

Data released earlier showed that China’s HSBC Flash Purchasing Managers Index, the earliest indicator of the country's industrial activity, fell to a six-month low of 49.6 in January from a final reading of 50.5 in December.

China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.