Gold Is Making A Huge Comeback

UPDATE: Earlier, we noted that gold posted its biggest drop since Friday's trading session after upbeat housing starts and jobless claims data were released at 8:30 AM.

After the release of the closely-watched Philadelphia Fed Business Outlook Survey at 10 AM, which unexpectedly plunged into negative territory, gold blew through the highs it set before 8:30 AM.

It's the biggest upward move we've seen in nearly two weeks.

The shiny yellow metal is now trading north of $1687 an ounce after dropping below $1670 before the Philly Fed number was released (click to enlarge):

Jobless claims and housing starts surprise to the upside and the gold market's knee-jerk reaction is to sell. The Philly Fed index surprises to the downside, and gold surges.

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ORIGINAL: Gold prices fell sharply at 8:30 AM after initial jobless claims came in well below expectations and housing starts surged 12.1 percent, four times what was expected.

Futures were trading over $1681 per ounce and immediately dropped to $1670 following the announcement (click to enlarge):

It's not a huge move, but it's the biggest drop in gold we've seen since Friday's trading session, and it's a good illustration of the knee-jerk reaction the gold market has to positive economic data right now.

The fear may be that the Fed will ease up on bond purchases sooner than expected in light of the improvement.