Spot gold was down 1.3 percent at $1,232.61 an ounce on Thursday, on track for the biggest one-day fall since Dec. 15, buoyed by a firm dollar and rising U.S. rate hike expectations in March following buoyant U.S. economic data and hawkish comments from Federal Reserve governors.
The number of Americans filing for unemployment benefits fell to near a 44-year low last week, pointing to further tightening of the labor market even as economic growth appears to have remained moderate in the first quarter. The stronger labor market and rising inflation could push the Federal Reserve to raise interest rates this month. Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 223,000 for the week ended Feb. 25, the lowest level since March 1973, the Labor Department said on Thursday. The figure of the previous week was revised down 2,000. It was the 104th straight week that claims remained below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970, when the labor market was much smaller. It is now at or close to full employment, with an unemployment rate of 4.8 percent. After the report, stocks on Wall Street slipped, the dollar firmed, while prices for U.S. government debt fell.
Labor tightness, combined with rising inflation, could encourage the Federal Reserve to raise interest rates at its March 14-15 policy meeting. Fed Chair Janet Yellen and Vice Chairman Stanley Fischer will speak on Friday, likely providing further signals on the U.S. central bank's policy path. A correction in gold, however, is likely to be shallow as investors remained friendly to bullion as a hedge against global uncertainty and rising inflation, analysts said.
On technical front, turning point in the medium term has not show up, suggesting retaining market confidence. Major institutional investors lifted year-end 2017 gold price forecast to $1,300. Bullion is widely expected to slip below $1,200 once again before regaining its ground within the year. Market volatility will pick up in the second half of 2017 no matter whether the U.S. central bank raises interest rates or not. But the accelerated turmoil in euro zone will provide a floor to gold.
Silver fell 3.8 percent to $17.71 an ounce, crossing below the 20-day and 200-day moving average, the key support since the start of 2017, and showing market panic in a period with an unusually high concentration of Fed hawkish speeches. Short positions shot up after recent gains of precious metals. A medium-term downturn is expected if it breached the support of $17.6. The next support can be found at $15.7 hit at the end of last December.

 
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