Gold fell on Wednesday after two days of gains, as encouraging US jobless claims data allayed some worries about growth due to fears Ireland's debt crisis could spread to other eurozone economies. New US claims for unemployment benefits last week dropped to their lowest level in more than two years while consumer spending rose in October, pointing to a moderate strengthening in economic activity.
The better-than-expected drop in jobless claims provided an incentive for bullion investors to square profits near the end of the year, said Fred Schoenstein, a trader at Heraeus Precious Metals Management. "A lot of the eurozone worries that we are hearing have already been priced in, and Ireland shows that it is ready to make the situation better," weighing on gold's safe-haven buying, he said.
In Ireland, the government unveiled a four-year austerity plan on Wednesday imposing deep spending cuts and tax increases to help pay for a bank crisis and meet the terms of an EU/IMF rescue. Spot gold fell 0.2 percent to $1,373.55 an ounce by 12:38 pm EST (1738 GMT), down from an earlier session high at $1,381.30, while US gold futures fell $4.30 to $1,373.30.
COMEX gold futures volume was about 200,000 lots at 12:45 pm, sharply lower than last year's 350,000 lots on the day before the US Thanksgiving Day holiday. The euro climbed from a two-month low against the dollar on Wednesday after losing over 2 percent in the last three sessions as investors considered the move overdone in thin trade in a holiday shortened week.
"I do think, however you look at it, it's going to have rest and a consolidation for a while, and as we speak, it trades (near) an all-time high in non-dollar terms," said Charles Morris a fund manager at HSBC Global Asset Management. An exchange of military fire between North and South Korea on Tuesday has further unsettled investors, putting Asian stocks under pressure and encouraging a sweep into perceived safe havens such as gold, government bonds and the Swiss franc.
In terms of factors fuelling a bid for safe-haven investments, Michael Widmer, a strategist with Bank of America-Merrill Lynch, said the eurozone debt crisis was the dominant one. Silver fell less than 0.1 percent to $27.47, even as holdings of silver in the world's largest physically-backed exchange-traded fund rose to a third consecutive record high, indicating robust demand for an alternate investment from gold. Platinum rose 0.6 percent to $1,656.24 an ounce, recovering from two straight days of declines, while palladium broke a two-day decline and rose 0.9 percent to $692.72.