Gold falls on improved outlook; payrolls eyed

NEW YORK Thu Jan 6, 2011 3:44pm EST

A shopkeeper shows gold bars after buying them from a customer in Bangkok's Chinatown October 14, 2010. REUTERS/Sukree Sukplang

A shopkeeper shows gold bars after buying them from a customer in Bangkok's Chinatown October 14, 2010.

Credit: Reuters/Sukree Sukplang

NEW YORK (Reuters) - Gold fell for a fourth consecutive session on Thursday as the dollar rose on signs the U.S. economic outlook was improving, but technical buying lifted prices off their lows.

Strong economic reports this week including purchasing managers' indexes, new factory orders and upbeat private-sector jobs data have driven the dollar higher, diminishing gold's safe-haven appeal. The data raised expectations that Friday's key U.S. jobs data will beat forecasts.

"There is always the fear that once the rebound in the U.S. gets cemented and attracts higher interest rates, investors start shifting money out of gold and into equities," said Mitsubishi analyst Matthew Turner.

The S&P 500 .SPX stock index was on track for its sixth straight week of gains, up more than 1 percent so far this week even after Thursday's slight retreat.

Some investors unwound solid gains made on thin volume in gold and other precious metals over the holidays. The year-end rally saw silver hit a series of 30-year highs and palladium touch a near 10-year peak. Gold had come within $10 of a new all-time high on Monday.

Spot gold fell 0.4 percent to $1,371.70 an ounce at 3:28 p.m. (2028 GMT) U.S. gold futures for February delivery settled down $2 at $1,371.70.

Spot silver fell 0.7 percent to $29.05 an ounce.

Trading volume steadied after noticeably busier sessions earlier this week. U.S. gold futures volume was 5 percent above its 30-day average, but COMEX silver turnover was about 10 percent below the 30-day average.

A larger-than-expected rise in weekly initial jobless claims on Thursday did little to alter investors' view that the economy is gaining traction, putting gold under pressure.

Oil prices lost $2 to $88 a barrel on the dollar strength, and industrial metals led by copper also fell 2 percent. The Reuters-Jefferies CRB .CRB index fell over 1 percent after the global commodities benchmark zigzagged in a volatile week.

Some analysts said underlying risk in the global economy should still boost gold to record highs despite better U.S. economic data.

"The debt problems in the euro zone's periphery haven't gone way... A tussle over the U.S. debt ceiling has the potential to further roil markets, lending support to gold in the next 2-3 months," said Peter Buchanan, senior economist at CIBC World Markets.

U.S. Treasury Secretary Timothy Geithner stepped up pressure on Republican lawmakers to raise the nation's $14.3 trillion debt limit, warning failure to act would lead to an economic catastrophe.

TECHNICAL BUYING

On charts, gold cut early losses, bouncing off lows at around $1,362 an ounce, a key support level in line with a series of lows set in December, said Adam Hewison, president of MarketClub.com. (Graphic: link.reuters.com/gah25r)

Hewison said gold's bounce up from session lows signals that it has found support after falling this week.

"Every time when gold had gotten down to these levels, it's very close to making a reversal higher," he said.

Gold has risen toward its record $1,430,95 an ounce level three times since November but failed each time.

Investment demand for gold-backed exchange-traded funds remained lackluster, with holdings of the world's largest gold ETF, New York's SPDR Gold Trust, dropping by nearly four tones on Wednesday to their lowest in early June.

Barclays Capital raised its 2011 forecast to $1,495 an ounce from a previous view of $1,445 in November.

"A clouded macro environment against a backdrop of low interest rates, growing uncertainty surrounding currency debasement and medium-term inflation fears as well as geopolitical tensions continue to stoke investor's appetite for a portfolio diversifier and a safe haven," Barcap's precious metals analyst Suki Cooper said in a note on Thursday.

Platinum inched up 0.1 percent to $1,727.74 an ounce and palladium dropped 1.8 percent to $759.47 after rising above $800 an ounce on Monday, its highest in nearly 10 years.

Prices at 3:30 p.m. EST (2030 GMT)

(Additional reporting by Jan Harvey and Amanda Cooper in London; Editing by David Gregorio and Marguerita Choy)

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Comments (3)
MattBkk wrote:
Cannot put my trust in any currency these days . . . Nor could I trust government or corporate I.O.U.’s, stock certificates or papers of any kind purporting to promise value or yield. That leaves GOLD as my refuge . . . for value that endures or grows (against fiat currencies) in an economically turbulent world.

Jan 06, 2011 6:16am EST  --  Report as abuse
bigturkey wrote:
Gold is a bubble. It may not burst this year or this decade but it has nearly no intrinsic value. The only value is based on the greater fools phenomenon i.e. if you own it and want to sell it that’s who’ll buy it.

Jan 06, 2011 2:08pm EST  --  Report as abuse
It looks to me like once again the gold & silver bears IE Jp Morgan Goldman (Government) Sachs & Mayor Bloomberg are trying to manipulate the metals market. Keep in mind they are short more ounces than should be allowed on the exchange and no one I mean no one will stop them. As well they want equities higher so they can make some money. I think the non farm payrolls after a holiday month are totally bogus anyway but just watch how Bloomberg plays on them. Fact is you still can’t get a line of credit or a mortgage and your credit card companies will find any reason to charge more interest. Baby it’s not a recession its a depression.

Jan 06, 2011 5:14pm EST  --  Report as abuse
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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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