Gold shoots up to five week highs

A lower dollar index and Chinese data boost prices

Bullion metals ended higher on Thursday, 24 October 2013. Gold futures tacked on more than 1% on Thursday for their highest close in five weeks as a gauge of manufacturing in China, one of the world's biggest gold buyers, climbed to a seven-month high in October. A lower dollar index also pushed up prices.

Gold for December delivery gained $16.30, or 1.2%, to settle at $1,350.30 an ounce on the Comex division of the New York Mercantile Exchange.

December silver rose 21 cents, or 0.9%, to $22.82 an ounce.

The precious metals got some bullish overnight news, with the preliminary HSBC China manufacturing PMI coming in better than expected, hitting a seven-month high of 50.9 in October versus the final PMI reading of 50.2 in September. A reading above 50.0 suggests economic expansion. An overheating housing market in China and the rising short-term interest rates are sparking fears the Chinese central bank could tighten monetary policy, which in turn could reduce demand for raw commodities coming from China.

In the European Union, its manufacturing and services PMI report came in weaker than expected, at 51.5 in October versus 52.2 in September.

At Wall Street, today's economic data was limited to weekly initial claims and the August trade balance report. Problems related to glitches from a computer upgrade in California continued to plague the initial claims data and artificially boosted headline levels. The weekly initial claims level fell to 350,000 from an upwardly revised 362,000 (from 358,000). The consensus expected claims to fall to 341,000. The Department of Labor stated that there was no way to separate the claims from California that were biasing the data from those in the private sector that lost their jobs as a result of the government shutdown.

Separately, the trade deficit widened to $38.8 billion in August from a downwardly revised $38.6 billion reported in July.

The dollar index, which weighs the strength of the dollar against a basket of six other currencies, fell by 0.2% on Thursday.

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