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Gold extends losses after jobless claims fall, CME margin hike

Published 08/11/2011, 10:19 AM
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Investing.com – Gold futures extended losses on Thursday, retreating from the record high after official data showed that U.S. jobless claims fell to a four-month low last week and after a margin increase by the CME Group on gold futures prompted some investors to sell their positions and lock in gains.

On the Comex division of the New York Mercantile Exchange, gold futures for October delivery traded at USD1,758.85 a troy ounce during U.S. morning trade, tumbling 1.75%. 

It earlier fell as much as 1.93% to trade at a daily low of USD1,756.05 a troy ounce.

The U.S. Department of Labor said earlier that the number of individuals filing for initial jobless benefits in the week ending August 5 fell by 7,000 to a seasonally adjusted 395,000, outstripping expectations for a decline to 401,000.

It was the lowest level since mid-April, helping to ease concerns over the U.S. economic outlook.

Meanwhile, the CME Group, operator of the Comex raised the amount of cash that traders must deposit for speculative positions by 22%, it announced late Wednesday.

The CME increased the so-called initial margin to USD7,425 per contract from USD6,075 per contract, pushing small investors out of the gold market as it raises the cost to trade a futures contract.   

The margin for hedging will also increase 22% to USD5,500 per contract from USD4,500.

Despite the pullback, gold prices remained well-supported amid fears the euro zone’s debt crisis could spread to the region’s banking sector.

Gold prices rose to a record high of USD1,815.65 a troy ounce earlier, the seventh record high in the past eight sessions.

Global financial service provider Commerzbank raised its average gold price forecast for the third and fourth quarter of 2011 to USD1,700 an ounce and USD1,800 an ounce respectively.

"The yellow metal is viewed not only as a safe haven and store of value, but increasingly as an alternative currency too," Commerzbank said.

Elsewhere on the Comex, silver for September sank 2.7% to trade at USD38.23 a troy ounce, while copper for September delivery surged 3% to trade USD4.014 a pound.

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