Gold News & Info

Source: Bill Musgrave, American Gold Exchange

Austin— Gold dropped 0.8% to close just over $1,175, a five-week low, as lower U.S. jobless claims and worker productivity boosted the possibility of higher interest rates later this year.

The number of first-time claims for jobless benefits fell 8,000 last week to remain near a 15-year low. Following yesterday's solid ADP report showing more than 200,000 workers added to private payrolls in May, the data raised hopes that tomorrow's non-farm payrolls report will signal strong growth in the labor market, something that may encourage the Fed to raise rates this year.

In addition, nonfarm productivity fell 3.1% in the first quarter, far more than previous estimated, marking the first back-to-back quarterly drops in five years. With the labor market tightening, falling productivity can translate into higher unit labor costs, fueling inflation and potentially prompting the Fed to hike rates sooner. Fed chair Janet Yellen has repeatedly cited low inflation as a main obstacle to tightening monetary policy. Higher rates have the potential to weigh on gold by boosting the dollar, reducing demand for alternative assets.

Gold bounced off session lows after the IMF, in its annual assessment of the U.S. economy, called on the Fed to delay tightening until 2016. The central bank should wait for "more tangible signs" of wage and price inflation because raising rates too soon could stall the U.S. and global economies, the report warned.

The other precious metals also fell, with silver losing 2.3% while platinum and palladium both slid 0.4%.

At the Comex close: August gold dropped $9.70 to $1,175.20; July silver lost 38 cents to $16.10; July platinum slipped $4.90 to $1,099.20; and September palladium slid $2.70 to $755.30 an ounce.