Gold tumbles below $2,000 as dollar rebounds on upbeat U.S. data

Gold has retreated sharply from a two-month peak, falling back below the $2,000 level to $1,989 by 17:00 GMT on Wednesday.

The precious metal was weighed down by a rebound in the U.S. dollar, which jumped against major peers after new economic data challenged expectations of an imminent American slowdown.

Figures showed an unexpected drop in U.S. weekly jobless claims last week to their lowest point in over a month. The resilient labor market numbers indicate the world’s largest economy may be proving more robust than feared amid aggressive Fed tightening.

“The fact we’re seeing a drop definitely suggests the labor market is not cooling as quickly as markets or the Fed might have been expecting,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

The report overshadowed separate data showing an unexpectedly sharp fall in U.S. capital goods orders last month.

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The dollar – gold’s arch-nemesis – extended gains after a University of Michigan survey showed U.S. consumers’ inflation expectations increased for a second straight month in November.

“The mix of data was largely still consistent with the soft landing thesis, but labor markets (are) holding up better than expected,” Schamotta said.

The dollar index had plunged to a 2-1/2 month trough on Tuesday before rebounding on indications from the Fed that U.S. rates may need to remain high for some time to fight inflation.