Gold Soars To End Above $1,200 On Soft U.S. Data, Weak Dollar

(RTTNews) - Gold futures snapped a three-day loss to end sharply higher Wednesday, on some soft economic data from the U.S. with private sector jobs rising less than expected in March.

The precious metal also found support with the dollar weakening against a basket of major currencies. A weaker dollar tends to encourage buying in dollar-priced commodities as it makes them cheaper to holders of other currencies.

The soft private sector jobs data has also raised concerns over the pivotal U.S. jobs report coming up later in the week. An upbeat jobs report for March could push the Federal Reserve to raise interest rates as early as July, according to some analysts.

Federal Reserve Chairman Janet Yellen's relatively hawkish speech last Friday helped stop late-March rally in gold prices, leaving the precious metal down sharply for the month.

Meanwhile, manufacturing activity in the U.S. saw continued growth in March, although the pace of growth slowed more than anticipated, the Institute for Supply Management said Wednesday. As well, a U.S. construction spending saw some further downside in February, after reporting a steep drop in spending in the previous month.

Gold for June delivery, the most actively traded contract, surged $25.00 or 2.1 percent to settle at $1,208.70 an ounce, on the Comex division of the New York Mercantile Exchange on Wednesday.

Gold for June delivery scaled an intraday high of $1,208.70 and a low of $1,180.50 an ounce.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at 737.24 tons on Wednesday, from its previous close of 743.21 tons.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 98.17 on Wednesday, down from its previous close of 98.38 on Tuesday in late North American trade. The dollar scaled a high of 98.64 intraday and a low of 97.98.

The euro trended higher against the dollar at $1.0770 on Wednesday, as compared to its previous close of $1.0734 in North American trade late Tuesday. The euro scaled a high of $1.0801 intraday and a low of $1.0720.

On the economic front, private sector job growth in the U.S. continued to slow in March, a report from payroll processor ADP showed Wednesday. ADP said private sector employment climbed by 189,000 jobs in March following a slightly upwardly revised increase of 214,000 jobs in February. Economists had expected an increase of about 230,000 jobs compared to the addition of 212,000 jobs originally reported for the previous month.

Manufacturing activity in the U.S. saw continued growth in March, a report from the Institute for Supply Management indicated Wednesday, although the pace of growth slowed more than anticipated. The ISM said its purchasing managers index dropped to 51.5 in March from 52.9 in February. While a reading above 50 indicates continued growth in manufacturing activity, economists had expected the index to show a more modest drop to 52.5.

A Commerce Department report on Wednesday showed U.S. construction spending saw some further downside in February, after reporting a steep drop in spending in the previous month. Construction spending edged down 0.1 percent to an annual rate of $967.2 billion in February after tumbling 1.7 percent to a revised $967.9 billion in January. The modest drop was in line with economist estimates.

China's manufacturing sector slipped into contraction in March, the latest report from HSBC showed on Wednesday, with a PMI score of 49.6. That was higher than the preliminary reading of 49.2, although it was down from 50.7 in February. It also moved below the boom-or-bust line of 50 that separates expansion from contraction.

Eurozone manufacturing sector expanded more than initially estimated as growth accelerated in Germany, Spain, Italy and the Netherlands, final data from Markit Economics showed Wednesday. The Purchasing Mangers' Index rose to a 10-month high of 52.2 in March from 51 in February. The flash score was 51.9.

German manufacturing growth in March was faster than estimated earlier, marking the strongest improvement in eleven months, survey data from Markit Economics showed Wednesday. The Markit/BME Germany Manufacturing Purchasing Managers' Index climbed to 52.8 from 51.1 in February. The flash reading for the index was 52.4, released on March 24.

British manufacturing sector expanded at the fastest pace in eight months during March as orders and production growth gathered momentum. The Purchasing Managers' Index rose to 54.4 from 54 in February, which was revised down from 54.1, survey results from Markit Economics and the Chartered Institute of Procurement & Supply showed Wednesday. The latest PMI reading was in line with economists' expectations.

The French manufacturing sector continued to contract in March but at a slower than initially estimated pace, final data from Markit revealed Wednesday. The Purchasing Managers' Index came in at 48.8 in March, up from 47.6 in February. The flash score was 48.2.

U.K. labor productivity declined in the fourth quarter, while labor costs rose moderately, data from the Office for National Statistics showed Wednesday. Labor productivity as measured by output per hour dropped 0.2 percent in the fourth quarter from prior three months, when it grew 0.5 percent.