Gold edged lower on Thursday as the euro's retreat from highs in the wake of US economic data prompted some buyers to cash in gains in the precious metal after a three-day run higher took prices to their strongest since mid-December. Spot gold was down 0.4 percent at $1,652.86 an ounce at 1436 GMT, having earlier peaked at $1,669.75, its highest since December 13. It has had a positive start to the year, up more than 6 percent since end December.
"Booking some profit after a strong run makes sense," said Saxo Bank senior manager Ole Hansen. "(The rally) is not overdone and will continue, but we need to retrace, have the support below confirmed before the next attempt." "The euro rally could be running out of steam ahead of $1.30," he added. The euro pared gains against the dollar after US data showed a sharp decline in first-time jobless claims last week and tame consumer prices in December. It rose in earlier trade after well-received Spanish and French debt sales soothed worries over the euro zone debt crisis.
European stocks rose on Thursday in brisk volume as investors rotated out of defensives and into banks. Risk appetite was helped by news that the IMF is seeking to more than double its war chest by raising $600 billion in new resources to help countries deal with the fallout of the euro zone debt crisis. "Despite the United States and UK saying that they would not commit to such a move, the market took heart that this would help ease the fiscal problems facing the euro zone," said Standard Bank in a note.
"This renewed confidence has seen markets adopt a cautious risk-on stance, pulling the dollar down and consequently easing downward pressure on precious metals and commodities in general." Traders awaited the outcome of talks between Greece and its private creditors, who meet for a second day of bargaining on a crucial bond swap deal on Thursday, with time running out for reaching a compromise needed to avoid a default.
Swiss bank UBS said in a note that gold's ability to rise even without the prospect of continuing strong physical demand, boded well for the precious metal. "Some participants may be reluctant to be long gold here, with the Lunar New Year next week impacting physical demand from many centres, particularly China, raising the risk that it won't be able to provide much of a price floor," it said.
"Hence if gold can end next week higher, it would be another positive sign." On the supply side of the market, Russian precious metals miner Polymetal said on Thursday it expects 2012 gold output to range from 590,000-640,000 ounces, up from 443,000 ounces last year, as it expands mining operations. Silver prices tracked gold lower, down 0.2 percent at $30.43 an ounce. Its ratio to gold - the number of silver ounces needed to buy an ounce of gold - dipped to 54.1, down from a peak of 57.4 hit in late December, its highest in more than a year.
"The gold:silver ratio has dropped back to...the base of our one-month range," said ScotiaMocatta in a note. "A close below 54.00 will bring in sellers of the ratio looking for a return to the 50.00 area." Spot platinum was up 0.4 percent at $1,524.74 an ounce, while spot palladium was up 1.3 percent at $672.97 an ounce.
Shares of Anglo American Platinum tumbled 4 percent on Thursday after the world's top platinum producer said 2011 earnings likely fell by about a third, hit by costs linked to a black empowerment deal. The company also said earnings were adversely affected by the high number of safety stoppages resulting in lower production, as well as higher costs, particularly for labour and electricity.
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