Gold slips as data buoys dollar versus euro

By Jan Harvey

LONDON (BestGrowthStock) – Gold slipped nearly 1 percent on Thursday, erasing most of this week’s gains, as the dollar rose to a three-week high against the euro after a raft of U.S. data and amid persistent concerns over euro zone debt levels.

Spot gold fell as low as $1,372.05 an ounce and was bid at $1,377.49 an ounce at 1610 GMT, against $1,384.55 late in New York on Wednesday. U.S. gold futures for February delivery fell $9.00 to $1,378.30.

U.S. data showed first-time claims for jobless benefits barely moved last week, suggesting the labor market is healing too slowly to cut unemployment.

Other reports showed U.S. consumer spending rose for a fifth month in November and incomes climbed by more than expected, while a rise in new orders for U.S. manufactured goods excluding transport also beat expectations.

The dollar held onto its earlier gains versus the euro after the data, pushing gold lower. Dollar strength typically curbs gold’s appeal as an alternative asset and makes dollar-priced assets more expensive for holders of other currencies.

That correlation weakened this year as concerns over euro zone sovereign debt levels lifted both assets, but the dollar’s performance next year will remain key to developments in the gold price, analysts said.

“This year it’s been a mixed bag with gold trading inversely to the U.S. dollar,” said Jeff Pritchard, an analyst and broker at Altavest Worldwide Trading.

“But as the U.S. debt becomes more and more of a focus, as it has to at some point…there is going to be more and more uncertainty in the U.S. dollar. That will drive people into other assets, and gold will definitely be one of them.”

HEADING FOR WEEKLY RISE

Thursday’s correction notwithstanding, gold is still heading for its first weekly rise in three. Its haven appeal rose after ratings agency Fitch said it may cut Greece’s foreign currency (Read more about trading foreign currency. rating and Moody’s threatened to downgrade debt-ridden Portugal.

“The prospect of further downgrades had an impact on the euro and (also) on gold,” said Peter Fertig, a consultant at Quantitative Commodity Research.

“This is probably calming down in the final few trading days of this year, but it will remain a topic going into next year. From that perspective, gold seems to be well supported.”

Analysts say gold and the other precious metals could be in for some hefty gains next year.

While the prospect of tighter monetary policy, initially in China, could be a threat to the metals, persistent concern over sovereign debt is likely to benefit gold, while more industrial precious metals will be supported by economic recovery.

“There are a number of risks clouding the outlook for 2011, including the threat to growth from the transition to tighter liquidity conditions in China and uncertainty over the extent to which sovereign debt contagion will affect other European countries,” said Barclays Capital in a report.

“However, we expect an environment of sustained economic recovery, more supportive financial market sentiment and exceptionally easy monetary policy to provide a fertile ground for price gains early next year.”

The world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, recorded its biggest one-day drop since early October on Wednesday, with its holdings declining just over 9 tones to 1,288.616 tones.

The fund’s holdings are up just over 2 tones since the end of November, against a rise of nearly 16 tones in the same period of last year.

Among other precious metals, platinum was at $1,712.99 an ounce against $1,721.50, while palladium was at $748.97 against $748.25. Silver was at $29.21 an ounce against $29.20.

(Editing by Alison Birrane)

Gold slips as data buoys dollar versus euro