Gold up on weaker U.S. economic data

Gold futures on the COMEX division of the New York Mercantile Exchange rose on Wednesday as U.S. economic data showed weakness.

The most active gold contract for December delivery rose 7 U.S. dollars, or 0.55 percent, to settle at 1,269.9 dollars per ounce.

Gold was given support as the housing starts report from the U.S. Department of Commerce showed housing starts decreasing by 9 percent to a 1.047 million annualized rate, which was worse-than-expected and lower than the lowest end of the consensus range. Analysts note that home building is at an 18-month low, and that this sent traders to the precious metal's safe haven properties.

Despite the weakness in the U.S. economic data, the precious metal's gains were capped by a stronger U.S. dollar and stronger U.S. equities. The U.S. Dollar Index rose by 0.05 percent to 97.93 as of 1845 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

The U.S. Dow Jones Industrial Average rose by 66 points, or 0.36 percent as of 1845 GMT. Analysts note that when equities post losses, the precious metal usually goes up, as investors are looking for a safe haven, while the opposite is true when U.S. equities post gains.

Traders are also waiting for the release of the weekly jobless claims, existing home sales, and the Philadelphia Fed Business Outlook Survey on Thursday, and investors note that barring any major weakness in the upcoming data, they believe the Fed may raise rates from 0.50 to 0.75 during the December FOMC meeting.

According to the CME Group's Fedwatch tool, the current implied probability of a hike from 0.50 to 0.75 is at 7 percent for the November 2016 meeting, and 65 percent at the December meeting.

Analysts believe Fed intends to soak up some of the banks' 2.5 trillion U.S. dollars of excess reserves as the U.S. economy continues to recover. Banks become more willing to take risks in a bullish economy, and as a result could potentially release some of their excessive reserves, flooding the economy with cash, causing inflation.

Silver for December delivery rose 2.5 cents, or 0.14 percent, to close at 17.663 dollars per ounce. Platinum for 2017 January delivery fell 3 dollars, or 0.32 percent, to close at 943.5 dollars per ounce. Endit