* U.S. dollar falls 0.75 percent versus basket of currencies
* Weak manufacturing in China, Europe, U.S. spur buying
* Big drop in US jobless claims suggests labor mart strength
(Updates commentary and prices, changes byline, dateline (prev
By Carole Vaporean
NEW YORK, May 23 Gold rose sharply on Thursday
as investors sought its safe-haven status after the dollar and
equity markets were hit by a slew of weak manufacturing data
that indicated stagnant global economic growth.
Stock markets around the world fell, extending the previous
day's sharp losses, on concerns about global economic growth and
the timing of the ending of the U.S. Federal Reserve's stimulus
"The combination of the weaker dollar and the drop in
equities markets has triggered fairly robust safe-haven buying
in gold," said James Steel, metals analyst and senior vice
president at HSBC in New York.
He added that weak manufacturing reports in China, Europe
and the United States contributed to investors favoring gold.
Spot gold was up 1.66 percent at $1,391.30 an ounce
by 3:13 EDT (1913 GMT). U.S. gold futures settled up
$24.40, or 1.78 percent, at $1,391.80 per ounce.
While Fed officials stressed that no change in the stimulus
program was likely for months at the earliest, investors are
anxious about that possibility. The Fed's easy money policy is
widely credited with fuelling massive gains in stocks this year
and previously in gold.
The precious metal's advance followed losses a day earlier
of more than 1 percent after Fed Chairman Ben Bernanke said a
decision to reduce the central bank's bond-buying program could
be taken in the 'next few meetings' if the U.S. labor market
showed sustained improvement.
James Bullard, president of the Federal Reserve Bank of St.
Louis, said he did not think the Fed was "that close" to
starting the process of winding down support.
But, any sign of improvement in the U.S. jobs sector will be
closely watched, as it may spur the Fed to scale back its
stimulus efforts as soon as September, analysts said.
On Thursday, a report showed the number of Americans filing
new claims for unemployment benefits fell last week, pointing to
resilience in the labor market.
"It seems the market is now squarely focusing on the
September 17-18 FOMC meeting for the Fed to make its move," ING
said in a note.
The dollar index fell 0.77 percent against a basket
of currencies. The euro zone common currency was up 0.6
percent, getting a modest lift from data showing the downturn
across euro zone businesses eased slightly this month.
A euro zone purchasing managers' index showed that while the
slump in business activity eased slightly in May, it pointed to
a further contraction in the second quarter. HSBC's flash
purchasing managers survey showed Chinese factory activity
shrank in May for the first time in seven months.
"China's drop in factory activity is showing that the
economy is still more fragile than we would have hoped for and
that weighed down on stock markets and may be read as helping
gold as a risk-off asset," Tuxen said.
U.S. manufacturing slowed for a second straight month in May
as weak overseas demand and government belt tightening at home
led to the sector's most sluggish growth rate since October.
As a gauge of investment, holdings in SPDR Gold Trust,
the world's largest gold-backed exchange-traded fund, fell 0.3
percent to 1,020.07 tonnes on Wednesday, the lowest in more than
Physical gold demand in Asia was seen normalising as
jewellers had largely replenished their stocks and retail
investors satisfied their needs following record buying after
the metal fell to a more than two-year low of $1,321.35 in
mid-April, analysts said.
Contrary to gold's gains, analysts said platinum group
metals slid in reaction to the weaker industrial sector reports.
Spot silver gained 1.71 percent to $22.57 an ounce,
while platinum slipped 0.44 percent to $1,459 an ounce
and palladium lost 1.28 percent to $734.46 an ounce.
Prices at 4:28 p.m. EDT (2028 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold 1391.80 24.40 1.8% -11.2%
US silver 22.508 0.036 0.0% -19.4%
US platinum 1457.20 -12.00 -0.8% 4.1%
US palladium 738.65 -13.50 -1.8% 12.6%
Gold 1390.64 22.52 1.6% -11.0%
Silver 22.58 0.39 1.8% -18.5%
Platinum 1457.99 -7.51 -0.5% 4.7%
Palladium 734.46 -9.54 -1.3% 12.6%
Gold Fix 1380.50 -5.50 -0.4% -12.3%
Silver Fix 22.47 -15.00 -0.7% -20.3%
Platinum Fix 1455.00 3.00 0.2% 5.4%
Palladium Fix 739.00 3.00 0.4% 16.2%
(Additional reporting by A. Ananthalakshmi in Singapore;
editing by William Hardy and Bob Burgdorfer)