Gold Tops $4,100 as Yields Fall and Labor Costs Cool

Spot gold rose to about $4,119.50 an ounce in early U.S. trading on Thursday, up $60.30 or 1.49%, after Treasury yields fell and the dollar weakened following the Democrats' midterm election win. The metal earlier hit $4,146.63, its highest since October 20, continuing to recover from the sharp correction it saw in October. Spot silver also rose to about $52.39 an ounce, up 0.56%.

U.S. economic data on Thursday gave positive signals on productivity and cost pressures. Nonfarm business productivity rose at an annual rate of 3.6% in the third quarter, after revised growth of 2.1% in the second quarter, while output rose 3.7% and hours worked rose only 0.1%. Unit labor costs fell at an annual rate of 0.7%, after a revised rise of 1.9% in the previous quarter, with hourly wages up 2.9%. The data indicated that improved efficiency helps companies absorb wage increases without a similar push on prices.

In the labor market, weekly jobless claims fell by 6,000 to 189,000 in the week ended October 31, versus expectations near 196,000, and the four-week moving average fell by 2,250 to 194,750. Continuing claims rose by 23,000 to 1.718 million in the week ended October 24, with the insured unemployment rate steady at 1.1%.

Despite the improved price backdrop, traders still price an about 80% chance of a 25-basis-point U.S. rate hike in December, at a meeting on December 8 and 9. The Fed had kept its target range between 3.75% and 4% in October, with two members favoring an immediate hike. The market awaits Friday's October jobs report, with expectations of an increase between 50,000 and 60,000 jobs and unemployment steady near 4.2%. Technically, resistance appears at $4,146 then $4,212, and support at $4,075 then $3,989.

What do these terms mean?

Spot gold: The price for immediate delivery of gold, or within two business days, and the most common reference for global trading in the metal.

Treasury yield: The return a government bondholder receives; it moves inversely to the bond price and affects gold's appeal.

Basis point: A small unit for measuring interest rates, where 100 basis points equal 1%.

PCE price index: An inflation measure the Fed watches, tracking changes in prices of consumer spending.

Support and resistance: Two price levels where a decline or rise may pause.