Gold lacked impetus to move out of its trading range on Thursday and analysts said market participants would avoid risk ahead of year-end holidays. The focus remained on the currency and oil markets, and any sharp move in the dollar and oil prices might stir the bullion market at a time when business was thin, they added.
"There are clear signs that things are slowing down for Christmas, even though it's still a few days away. Gold remains tied to the dollar and the dollar has broadly stabilised compared with the big moves a couple of weeks ago," Stephen Briggs, economist at SG Corporate and Investment Banking, said.
"Unless there is a specific trigger, and the most obvious one...might be a move in the dollar, I don't think anybody is going to take too aggressive a stance," he added.
Spot gold was at $628.20/629.70 an ounce by 1558 GMT, against $628.00/629.50 late in New York on Wednesday, when it tested key resistance at $630 for the third time this week but failed to hold gains.
Gold hit a 26-year high of $730 in mid-May and has fallen about 14 percent since then. But prices are still up around 21 percent since the start of this year. "I don't see any support from oil and I guess we'll be trading in a range of $624 to $632 today," a metals dealer in Hong Kong said. Gold may be open to selling ahead of the year-end but the metal's long-term outlook remained bullish because of a fragile dollar, dealers said.
"Before the end of the year, there is not much reason for prices to move in either direction in a big way. It would take some external factors to move the market," said Matthew Turner, analyst at Virtual Metals.
The dollar had come under almost unabated pressure over the past month as investors bought into the notion that the US economy was slowing enough to warrant a cut in official interest rates by the Federal Reserve in early 2007. But the US currency gained on Thursday after an upbeat reading of US jobless claims offered investors renewed incentive to buy the currency.
Gold often moves in the opposite direction to the dollar. "We continue to expect little excitement from precious metals into the end of the year, although intra-day volatility is likely to continue," said John Reade, head of metals strategy at UBS Investment Bank. "We do expect metal prices to trade higher in the new year and hold our one month forecast for gold at $660 and silver at $14 an ounce," he said in a daily note.
Spot silver edged up to $13.78/13.85 an ounce from $13.75/13.82 in New York. In other metals, platinum rose $1 to $1,108/1,113 an ounce, while palladium added $2 to $328/332. "Platinum and palladium are just dead," Briggs said.