Results tagged “Federal Reserve” from Capital Gold Group, Inc.

U.S. Economy: Unemployment Rate Increases to Four-Year High

By Shobhana Chandra

Aug. 1 (Bloomberg) -- The U.S. unemployment rate rose to the highest level in more than four years as employers cut jobs again in July, increasing the threat of a deeper economic slowdown.

Payrolls fell by 51,000, less than forecast, the Labor Department said today in Washington. The jobless rate rose to 5.7 percent, from 5.5 percent the prior month. As recently as April, it was 5 percent. A separate report showed that manufacturing stagnated in July as companies were hit by rising raw-materials costs and slower spending.

``This is further evidence the economy is in a recession, probably a shallow recession,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts, referring to rising joblessness. ``It will be a major drag on consumer spending.''

The last time the unemployment climbed so much in three months was at the end of the last U.S. recession in 2001. Payroll cuts combined with decreasing property values, stricter lending rules and near-record energy prices to send consumer confidence levels close to the weakest in 16 years in July.

Cutbacks at UAL Corp. and Starbucks Corp. signal firings are spreading beyond builders and manufacturers as raw-materials costs soar. General Motors Corp., which today announced a second- quarter loss of $15.5 billion, may eliminate about 5,000 U.S. jobs by year-end, people familiar with the plan said this week.

Payroll declines spanned transportation, retailing, manufacturing and temporary services industries, the Labor figures showed.

Treasuries, Stocks

Stocks dropped and Treasuries were little changed. The Standard & Poor's 500 Stock Index fell 0.7 percent at 10:21 a.m. in New York, to 1,258. Yields on benchmark 10-year notes were at 3.96 percent from 3.95 percent late yesterday.

The Institute for Supply Management's factory index fell to 50, a higher reading than forecast, from 50.2 in June, the Tempe, Arizona-based group said today. A reading of 50 is the dividing line between expansion and contraction. The Commerce Department reported construction spending dropped 0.4 percent in June.

Today's unemployment figures reinforce the case for the Federal Reserve to hold off on any interest-rate increase until next year, economists said.

The Fed's ``hands are tied, there is nothing they can do with regard to this,'' said Kathleen Stephansen, director of global economics at Credit Suisse Holdings USA Inc. in New York in an interview with Bloomberg Radio.

Revisions added 26,000 to payroll figures previously reported for May and June. Economists had projected payrolls would drop by 75,000 after a 62,000 decline the prior month, according to the median of 80 forecasts in a Bloomberg News survey. The jobless rate was forecast to rise to 5.6 percent.

Losses So Far

The July cuts bring the total drop in payrolls so far this year to 463,000.

Democratic presidential candidate Barack Obama plans to announce today an emergency economic plan that would impose a windfall profit tax on oil companies to pay for rebate checks of $1,000 to families and $500 to individuals. He also backs a $50 billion stimulus package, including funds for bridge and road maintenance, intended to save 1 million jobs.

Senator John McCain, the Republican candidate, criticized Obama for advocating higher taxes. ``There is no surer way to force jobs overseas than to raise taxes.''

The National Bureau of Economic Research, the official arbiter of U.S. contractions, tracks payrolls, sales, incomes, production and gross domestic product in making the recession call. The group defines downturns as a ``significant'' decrease in activity over a sustained period of time, and usually takes six to 18 months to make a determination.

Recession Call

The economy shrank at the end of 2007 and grew less than forecast in this year's second quarter, figures from the Commerce Department showed yesterday. Some economists said this indicated the U.S. slipped into a recession late last year.

``The economy is limping along right around zero, slightly positive,'' said former St. Louis Fed President William Poole in a Bloomberg Television interview today.

Fed policy makers will probably keep their benchmark rate at 2 percent when they meet on Aug. 5, futures prices show.

More Americans filed initial claims for unemployment benefits last week than at any time in over five years, Labor reported yesterday. Consumer confidence surveys have indicated that Americans, growing more pessimistic about job prospects, may trim spending.

Starbucks Cuts

Starbucks, the world's largest chain of coffee shops, this week said it'll cut another 1,000 jobs as sales slump. The Seattle-based company on July 1 announced plans to eliminate as many as 12,000 positions worldwide.

Factory payrolls fell 35,000 after declining by the same amount in June. Economists had forecast a drop of 40,000. The decrease included a drop of 3,000 jobs in auto manufacturing and parts industries.

July announcements at airlines included 7,000 cuts at UAL's United Airlines, and 6,840 at American Airlines parent AMR Corp.

The protracted housing slump and resulting credit crisis were also reflected in today's report. Construction payrolls declined 22,000, the smallest drop since October, after decreasing 49,000. Payrolls at financial firms were unchanged after declining 13,000 the prior month.

Services Jobs

Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 5,000 workers, the first decline since March. Retail payrolls decreased by 16,500 after a drop of 6,300.

Government jobs increased by 25,000, the 12th month of gains in public payrolls, after an increase of 43,000.

The average work week shrank to 33.6 hours from 33.7 hours. Average weekly hours worked by production workers were unchanged at 41, and overtime was also unchanged at 3.8 hours. That brought the average weekly earnings up by 22 cents to $606.82 in July.

Workers' average hourly wages rose 6 cents, or 0.3 percent, to $18.06, matching economists' forecasts.

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DOW LOWEST IN 21 MONTHS

 

NEW YORK (CNNMoney.com) -- Gold prices jumped Thursday, rising back above the psychologically important $900 mark, on renewed fears about the health of the U.S. economy.

Gold for August delivery settled at $32.80 to 915.10 an ounce on the New York Mercantile Exchange. The precious metal hit an all-time intraday high of more than $1,030 an ounce back in mid-March.

"Weakness in the dollar has helped propel gold sharply higher today," said James Steel, an HSBC metals analyst in New York.

In addition to the dollar's decline, gold was supported by a surge in the price of oil and signs that the credit crisis is alive and well on Wall Street.

"I think the bottom is rather limited, given the dollar and credit concerns, plus high oil prices," he said.

Dollar weakness The dollar lost ground against the euro Thursday after the U.S. government reported that the nation's economy grew at a sluggish rate of 1% during the first quarter.

The euro rose to buy $1.5736 in afternoon trading, up from $1.5667 late Wednesday.

The greenback's weakness also stems from the Federal Reserve's decision Wednesday to hold interest rates steady at 2% as the central bank struggles to deal with a flattening economy coupled with rising prices.

The Fed's decision "signaled that inflation in near term is still uncertain," Steel said. That can drive gold prices higher because many investors see precious metals as a hedge against inflation.

Oil jumps T

The dollar's decline helped boost oil prices Thursday. Reports that Libya may cut oil production and that an OPEC official said crude could hit $170 a barrel this summer gave crude prices additional support.

Light, sweet crude for August delivery rose $3.65 to $138.20 a barrel on the New York Mercantile Exchange. The price climbed as high as $138.95 - a $4.40 gain and within $1 of the all-time intraday high of $139.89 - earlier in the session.

"To some extent, the gold market takes its cues from oil," Steel said. When oil rallies, gold tends to follow suit because oil is such a large component of commodities indices, he said.

Stocks swoon

Wall Street was battered Thursday afternoon, with the Dow industrials hitting its lowest intraday level in 21 months. The selloff was prompted by downgrades in the financial sector, the resurgence of credit concerns and the fallout from disappointing quarterly reports in the tech sector.

Gold often rallies when the stock market is in decline. "It is a traditional safe haven in periods of financial stress," Steel said.

Stocks came under pressure after Goldman Sachs cut its ratings on U.S. investment banks to "neutral'' from "attractive" because of continued deterioration of the banking industry and the prospect of a lengthy recovery. It also added Citigroup to its "conviction sell'' list.

Meanwhile, the stock market is digesting corporate results released late Wednesday from tech leaders Oracle and Research In Motion.

Oracle (ORCL, Fortune 500) easily beat Wall Street expectations for its fiscal fourth quarter results but the software maker gave more conservative guidance that disappointed investors.

BlackBerry maker Research in Motion (RIMM) missed its target and guided down its profit forecast for the quarter.

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"Dollar is going to get slammed again." 

 

By Pham-Duy Nguyen

June 26 (Bloomberg) -- Gold surged the most in 16 months on speculation the Federal Reserve won't rush to raise borrowing costs to curb inflation. Silver jumped the most since March.

The Fed yesterday kept its benchmark interest rate at 2 percent, even as policy makers acknowledged heightening inflationary expectations. An OPEC official said crude oil may reach $170 a barrel soon. Gold reached an all-time high of $1,033.90 an ounce in March as fuel, corn and other commodities soared and the dollar fell to a record against the euro.

``The Fed said that inflation is a major concern, but they're not going to do anything about it, which made gold go ballistic,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. ``The dollar is going to get slammed again.''

Gold futures for August delivery jumped $31.10, or 3.5 percent, to $913.40 an ounce at 12:18 p.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest percentage gain for a most-active contract since Feb. 21, 2007.

Silver futures for September delivery soared 75.3 cents, or 4.5 percent, to $17.36 an ounce. A close at that price would mark the biggest increase since March 5.

Before today, silver advanced 11 percent this year, while gold climbed 5.3 percent.

Traders trimmed bets on a rate increase in the next three months after the Fed's announcement yesterday. Interest-rate futures show a 26 percent chance the Fed will keep borrowing costs at 2 percent in September, compared with a 2 percent chance a week ago.

Iran Tensions

Chakib Khelil, Algeria's oil minister and the president of the Organization of Petroleum Exporting Countries, said in an interview on France 24 television that a conflict involving Iran might push oil prices over $200 and as high as $400.

Oil rose as much as 3.3 percent today to $138.95. The record was $139.89 on June 16. Iran has the second-biggest proved oil reserves and is OPEC's second-largest producer.

``Gold rose on the comments from OPEC,'' said Narayan Gopalakrishnan, a trader at MKS Finance, one of Switzerland's four bullion refiners.

Investors traditionally buy gold to hedge against a loss of purchasing power. Gold rallied 39 percent from Sept. 17 to March 17 as the Fed slashed rates from 5.25 percent after a housing slump and credit crisis threatened to push the U.S. economy into recession.

Analysts say the economy is too feeble for the Fed to raise rates any time soon. The U.S. gross domestic product expanded at an annual rate of 1 percent in the first quarter, capping the weakest six months of growth in five years.

Commodity Rally

The Reuters/Jefferies CRB Index of 19 raw materials rose to a record today and has gained 29 percent this year. In May, U.S. consumer costs climbed at an annual rate of 4.2 percent and wholesale prices rose 7.2 percent, according to data from the Labor Department.

``The Fed seems to have decided to protect growth by holding rates low and to accept the fact that this period of inflation is inevitable and unstoppable,'' said Patrick Chidley, an analyst at Barnard Jacobs Mellet in Stamford, Connecticut. ``Inflation is the lesser of two evils. Investors will increase their positions in gold, and it's likely to continue upward.''

The Fed has been more aggressive in cutting rates and slower to raise borrowing costs than other central banks, eroding the value of the dollar, analysts said.

`Major Problem'

``The Fed's decision to not fight inflation is having a direct impact on gold prices along with many other commodities,'' said Tom Hartmann, an analyst at Altavista Worldwide Trading Inc. in Mission Viejo, California. ``Interest rates will not rise, though that would be a quick way to combat high commodity prices. The Europeans and other central banks seem keenly aware that inflation is a major problem.''

The European Central Bank has held its benchmark rate unchanged at 4 percent since June 2007. The Bank of England's key lending rate is at 5 percent.

Russia's oil funds may invest in gold, Moscow-based agency RIA Novosti said, citing a finance ministry official. Russia's Reserve Fund and the National Wellbeing Fund were worth a combined $161.9 billion on June 1. . . .

 

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U.S. Shares in Longest Funk Since 1970s; Credit Crunch Could Prolong Weakness

by E.S. Browning

Over the past 200 years, the stock market's steady upward march occasionally has been disrupted for long stretches, most recently during the Great Depression and the inflation-plagued 1970s. The current market turmoil suggests that we may be in another lost decade.

The stock market is trading right where it was nine years ago. Stocks, long touted as the best investment for the long term, have been one of the worst investments over the nine-year period, trounced even by lowly Treasury bonds.

A look at stocks during downturns

The Standard & Poor's 500-stock index, the basis for about half of the $1 trillion invested in U.S. index funds, finished at 1352.99 on Tuesday, below the 1362.80 it hit in April 1999. When dividends and inflation are factored into returns, the S&P 500 has risen an average of just 1.3% a year over the past 10 years, well below the historical norm, according to Morningstar Inc. For the past nine years, it has fallen 0.37% a year, and for the past eight, it is off 1.4% a year. In light of the current wobbly market, some economists and market analysts worry that the era of disappointing returns may not be over.

Until last fall, many investors had viewed the bursting of the tech-stock bubble as a nasty but short-term setback. The market had resumed its upward march, reaching new highs in October.

Then the credit crisis began weighing on stocks, as did the possibility of a recession. By March 10, the S&P 500 was down 18.6% from its Oct. 9 record close, nearing the 20% decline that signals a bear market. It has rebounded since then amid the Federal Reserve's efforts to stabilize the financial system, but it remains 13.3% below its October record.

Conventional stock-market wisdom holds that if investors buy a broad range of stocks and hold them, they will do better than they would in other investments. But that rule hasn't held up for stocks bought in the late 1990s or 2000.

Over the past nine years, the S&P 500 is the worst-performing of nine different investment vehicles tracked by Morningstar, including commodities, real-estate investment trusts, gold and foreign stocks. Big U.S. stocks were outrun even by Treasury bonds, which historically perform much less well than stocks. Adjusted for inflation, Treasurys are up 4.7% a year over the past nine years, and up 5.8% a year since the March 2000 stock peak. An index of commodities has shown about twice the annual gains of bonds, as have real-estate investment trusts.

Stocks also underperformed other investments during the 1930s and the 1970s. During both of those periods, stocks would rally strongly, only to fade. It took well over a decade in each case for stocks to move lastingly upward.

Righting the Ship

So far, the current decade hasn't featured the high inflation of the 1970s or the high unemployment of the 1930s. That makes some analysts and economists hopeful that the stock troubles won't be as bad or last as long as they did back then, despite the housing crisis and the breakdown in parts of the mortgage and lending businesses. Many of them hope that the Federal Reserve will do a better job of righting the ship than it did in those prior decades.

Finance professor Jeremy Siegel at the University of Pennsylvania's Wharton School has written about stock behavior back into the 19th century. During the past decade, he points out, the worst years were from 2000 through 2002, when stocks fell sharply. Although the S&P 500 has been inconsistent since then -- rising strongly in 2003, then registering single-digit gains in 2004, 2005 and 2007 -- he considers the bad times largely past. Other optimists agree.

The Pessimistic View

But Yale economist Robert Shiller, who predicted the market trouble in his 2000 book "Irrational Exuberance," warns that the market still hasn't shaken off its excesses. He and some other analysts think the latest volatility is a symptom of more trouble to come.

"I have to say that this isn't a great time to be in the stock market," says Prof. Shiller. "The housing crisis that we are going through is going to put a damper on the economy that is longer than a recession. I don't see the stock troubles ending as quickly as many people are imagining."

Historically, stocks rise about two years out of every three, for an average gain of 7% a year when controlled for inflation, according to Prof. Siegel. Stocks have shown gains for almost every 10-year period since 1925 -- 98.6% of the time, according to Ned Davis Research.

But when stock investing becomes a mania, as it did in the 1920s, the 1960s and the 1990s, it leads to prolonged periods of subpar performance, according to financial historian Richard Sylla of New York University's Stern School of Business.

Prof. Sylla has examined stock booms and busts back to 1800. He found periods of exceptional strength in the late 1810s and early 1820s, the 1840s, the 1860s and the early 1900s. Those periods were followed by lengthy weakness in the 1830s, the 1850s, the 1870s and before 1920. In a 2001 paper, he forecast a 10-year period of stock weakness.

"When you have extraordinary returns, as we did from 1982 through 1999, then usually the next 10 years aren't very good," says Prof. Sylla. His research suggests that exceptional booms steal gains from the future. When the booms end, returns become subpar, so that average returns over the longer term fall back to the 7% norm. Economists call this "reversion to the mean," the idea that exceptional performance can't last forever.

Bullish investors believed that the bad days were over late in 2002, when stocks rebounded following the technology-stock wreck, the Sept. 11 terrorist attacks and the collapse of Enron Corp.

The S&P 500 rose 26% in 2003, amid hopes for a quick victory in Iraq. In 2004, the S&P 500 rose only 9%. It was up 3% in 2005, 14% in 2006 and 3.5% in 2007. The index is down 7.9% so far this year. Those numbers are not adjusted for inflation, which would lower annual returns by a few percentage points.

The Dow Jones Industrial Average, which had fewer technology stocks than the S&P 500 and suffered less in the bear market from 2000 to 2002, has held up better, but not a lot better. It has risen less than 1% a year since January 2000.

Role of Individuals

Prof. Sylla expects to see stocks turn more lastingly upward some time in the next two years. The market's direction will depend partly on the individual investor. The 1990s stock bubble and the bear market that followed came at a time when more individuals were managing their own retirement savings through 401(k) accounts, individual retirement accounts and the like.

Individual investors helped create bubbles in the markets for technology stocks and for real estate. In recent years, investors have been putting far less money into U.S. stocks than they did during the stock-investing boom. In 2000, at the height of that boom, Americans added $260 billion to U.S.-stock mutual funds, according to the Investment Company Institute, a trade group. Last year, investors took more money out of those funds than they put in -- a net outflow of $46.4 billion.

America's shift toward self-managed retirement could soften some of the stock-market volatility. People appear to be much less likely to move money around in retirement accounts than in other investment accounts, according to economist John Ameriks at mutual-fund company Vanguard Group.

Many 401(k) participants leave their allocations alone for long periods of time, says Mr. Ameriks. If they set up their accounts to send money into stocks each month, those accounts tend to keep doing so through bull and bear markets alike. That may provide some support to stocks.

Some investment advisers say passive contributions like that actually make some sense. People whose retirement accounts have bought stocks each month, year in and year out, haven't done nearly as badly as those who bought in the late 1990s and stopped buying, Prof. Sylla says. While the S&P 500 is down since 1999, it is up since mid-2001, meaning that most stock purchased since then by retirement accounts shows a gain.

Stock Fundamentals

A big problem for the market right now is what analysts call stock fundamentals. Strong corporate-profit gains and low inflation have supported stocks since 2002, but they are becoming harder to sustain.

In a typical year, Prof. Sylla says, corporate profits run at about 5% or 6% of total economic output, after tax. In 2006, that number was 9%, a record. Historically, this number tends to revert to the mean, suggesting that profits now could weaken. "Profits may fall to 3% or 4%" of economic output, Prof. Sylla says.

Spending by ordinary people could have an effect on those profits. Consumer borrowing and spending kept the economy afloat after the stock bubble popped in 2000. Emboldened by high home values, people borrowed at levels rarely seen, pushing down the national savings rate to zero.

That's what worries Prof. Shiller. After studying the housing market, he sees home values continuing to weaken for years. He expects consumers to borrow and spend less, and to rebuild their savings.

A consumer pullback would hold back economic growth and corporate profits, putting a damper on U.S. stock gains and giving investors an incentive to continue putting money into commodities or stocks in Brazil, Russia, India and China. Baby boomers concerned about retirement income could look for safer investments with guaranteed returns, such as Treasury bonds and bond-like products offered by mutual-fund companies.

On the Horizon

"We have to accept that this is no longer a nation of 4% real economic growth. This is a mature nation that no longer has a strong manufacturing base," says Steve Leuthold, chairman of Leuthold Weeden Research in Minneapolis. He believes that another bull market is on the horizon, perhaps following some additional stock declines. But that future bull market, he contends, could be followed by another bear market that could bring stocks back close to where they are today.

Before another lengthy bull run can begin, stocks need to overcome two problems: the hangover from the high prices of the late 1990s, and the continuing effects of the exceptionally low interest rates instituted by the Federal Reserve in 2001 and again today. Those low interest rates helped push corporate profits higher, but also fueled borrowing excesses that led to today's economic problems.

To some analysts, stock prices still look inflated. Prof. Shiller calculates that the S&P 500 traded in the late 1990s at more than 40 times its component companies' profits -- far above the historical norm of 16. (To avoid distortions, he uses average profits over a 10-year period.) Today, the S&P 500 still trades at more than 20 times profits -- still far above average.

"The S&P 500 never got back down to its long-term trend line" after the 1990s, says Jeremy Grantham of Boston money-management firm Grantham, Mayo, Van Otterloo & Co. Mr. Grantham, who has long warned of a prolonged period of subpar stock performance, says exceptionally low interest rates temporarily propped up the indexes.

There are reasons to hope that things won't be as ugly this time as they were either in the 1970s or in the 1990s in Japan, which went into a prolonged slump after bubbles in its housing and stock markets.

For one thing, although inflation has been running above 4% this year, it remains well below the double-digit rates of the 1970s. That's made it easier for the Fed to stimulate the economy without worrying about sparking runaway inflation.

One big question is how much worse investor confidence will get. The bearish Mr. Grantham expects investors to become gloomier, but not as pessimistic as they were during past bad stretches.

"I think the global economy will stay, on balance, not so bad," he says. "There is no reason for people to become as pessimistic as they did even in Japan, and certainly not as pessimistic as in the Depression."

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By Atul Prakash and Bate Felix

LONDON (Reuters) - Gold fell more than 2 percent in a broad commodities sell-off on Friday, with a rise in the dollar and softer oil prices dampening the metal's allure as an alternative investment.

Other key precious metals, base metals and major soft commodities traded lower, with investors pocketing profits before the end of the quarter.

Gold fell to $926.50 before rising to $933.30/934.20 an ounce at 11:40 a.m. EDT, against $951.80/952.60 in New York late on Thursday. Last week, it hit a record high of $1,030.80 an ounce before tumbling to a one-month low of $904.70.

"The market is really correcting itself, but it's a general move out of commodities. It's not just gold," said Jeremy East, head of metals trading at Standard Chartered Bank.

The market witnessed a heavy sell-off last week before rebounding on technical buying. Now it was witnessing a continuation of the downward trend, with people liquidating their positions and running for cash, East said.

"But I don't think the bullish trend is over. There is still buying interest, but in the short term the market has probably overdone on the upside. We are in a consolidation phase and gold may break back down below $900 again."

The dollar edged higher but hovered not far from record lows against the euro after U.S. data showed inflation pressures were tame in February, affirming expectations of further interest rate cuts by the Federal Reserve to boost a weakening economy.

A firmer dollar makes gold costlier for other currency holders and often lowers demand. Lower oil prices reduce the metal's appeal as a hedge against inflation.

Oil fell more than $2 to near $105 a barrel as crude flows through Iraq's pipeline system were restored after disruption by a bomb attack on Thursday.

"I would expect gold to continue bouncing around in the range of about $955 on the upside and down to about $915," said Tom Kendall, metals strategist at Mitsubishi Corporation.

"It's going to take until the second half of the next week before the market is going to be ready to make a more convincing push upward again."

U.S. gold futures for April delivery fell $16.6 an ounce to $932.20 -- off last week's record of $1,033.90.

LONG-TERM POSITIVE

Analysts were positive on the metal's outlook in the medium to long term.

"The sudden price pull-back across the precious metal complex during March has raised concerns that the bull run in this sector has drawn to a close. We disagree," said Michael Lewis, global head of commodities research at Deutsche Bank.

"We believe weakness in the U.S. dollar has not been exhausted and with U.S. real interest rates expected to move deeper into negative territory, we are maintaining our bullish outlook towards gold and silver prices," he said in a report.

In other metals, spot platinum rose to a one-week high of $2,040 an ounce before falling to a low of $1,980. It was last at $2,010/2,020, versus $2,023/2,033 in New York. It struck a record high of $2,290 on March 4 on supply fears driven by mining disruptions in top producer South Africa.

Platinum gained around 50 percent in 2008 after a power crisis in South Africa forced gold and platinum mines to shut down for five days in January, driving platinum prices.

But the metal, mainly used in jewelry and auto catalysts to clean exhaust fumes, tumbled to a six-week low at $1,805 an ounce last week.

Silver fell to $17.93/17.98 from $18.50/18.55 an ounce -- off a 27-year high of $21.24 hit on March 17. Palladium dipped to $439/446 an ounce from $445/450.

(Reporting by Atul Prakash; editing by Chris Johnson)

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03.27.08, 9:48 AM ET

LONDON (Thomson Financial) - Gold extended earlier losses as the dollar gained ground against the major currencies on relief that the revised US GDP reading for the fourth quarter did not yield any nasty surprises.

The Commerce Department said earlier the US economy grew at a 0.6 pct annualised pace in the fourth quarter, the same rate as reported in the previous estimate.

The reading was in line with analysts' estimates, leading the dollar to extend an earlier rebound from sharp losses yesterday, and leading gold lower in turn.

Gold usually moves in the opposite direction to the dollar as it is seen as an alternative asset to the US currency. Also, a stronger dollar makes dollar-priced gold more expensive for holders of other currencies.

At 1.27 pm, spot gold was trading at 946.45 usd an ounce against 949.00 usd in late New York trade yesterday.

In other data releases, the number of first time jobless claims filed in the week ending March 22 dropped unexpectedly, falling by 9,000 to 366,000. Economists were expecting new jobless claims to total up to 370,000.

'Spot gold was quoted down 10.00 usd at 944.00 usd bid per ounce as participants deemed the US data to be dollar-positive,' said Kitco analyst Jon Nadler.

He added the 0.6 pct growth reported for the US economy in the fourth quarter was giving some participants another excuse to sell on fears that a US recession will crimp commodities demand going forward.

Commodities declined sharply last week as these fears were temporarily re-ignited. They have recovered some of their losses this week however, as funds dip back into oil, metals and gold.

Most analysts expect the recovery to continue, with gold the best placed amongst all the metals to benefit from the view that it is a safe haven asset that holds its value in times of economic turmoil.

'Given the renewed pressure on the dollar and inflationary pressures created by rising oil prices we expect gold to continue its recovery,' said TheBullionDesk.com analyst James Moore.

He added that given the likelihood of further rate cuts by the Federal Reserve, and given the ongoing financial market turmoil, he sees gold eventually establishing fresh highs above the recent record of 1,032 usd.

Elsewhere, platinum dipped to 1,992 usd an ounce against 1,994 usd, silver was down at 18.14 usd an ounce against 18.33 usd, while palladium fell to 440 usd against 454 usd.

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