| NEW YORK
NEW YORK 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.
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)