Gold eased but held in sight of four-week highs on Thursday, supported by concern about the outlook for US growth and the European debt crisis. Data this week has painted a picture of a US economy that may be running out of steam as companies hired fewer workers than expected, factory activity hit a near-two year low, auto sales slowed and pricier gasoline ate into retailers' sales.
The dollar has fallen to its lowest in a month against a basket of currencies and although there has been some respite to the concern over the eurozone's finances, gold has managed to gain more than 2 percent in two weeks. Spot gold eased 0.2 percent to $1,536.85 an ounce by 1418 GMT, having hit $1,550.14 on Wednesday, its highest since May 3. US gold was down 0.3 percent at $1,537.70, while euro-priced gold fell by 1.1 percent on the day to 1,063.82 euros an ounce.
"Right now, the flows are perhaps being tempered a little bit by seasonal weakness, but it bodes well that at the start of May, when prices dipped below $1,500 that physical interest out of Asia did materialise, not as aggressively as we'd seen before, but that interest is still present and it's still very healthy," said Suki Cooper, Barclays Capital analyst.
"Thus the inflows that we've seen over the last couple of week's haven't been hefty, but they have been supported on the back of factors like the weaker-than-expected macro data, the resurfacing of the sovereign debt issues and inflation fears are still ticking away in the background."
The dollar extended losses after another round of data showed a much smaller fall in weekly first-time claims for jobless benefit in the United States, helping the oil price recover from session lows. The softness in the dollar has cushioned the gold price, although with the traditionally slower summer months approaching, analysts were cautious on the likelihood of gold returning to May's record high at $1,575.59 an ounce.
The gold price has risen by more than 5 percent since the early-May sell-off across the commodities complex and the outflow of cash from the bullion market, as evidenced by declines in exchange-traded fund and futures holdings, has started to reverse. In ETF flows, gold holdings rose for the first time since May 26, up about 70,000 ounces to 64.542 million ounces, bringing the net change in holdings for the year to -0.73 percent, from -0.66 percent a week ago.
Ratings agency Moody's cut its rating for Greek government debt further into junk territory, although the euro recovered on the back of optimism over a bailout deal for Athens. "The downgrade of Greece wasn't a major factor for the precious metals, it is more of a currency play," said Quantitative Commodity Research strategist Peter Fertig.
"There is already some reflection that investors have returned to gold despite institutional investors having reduced their exposure," he said
"You are in a period of seasonal weakness in gold. This does not exclude that we might see a record high over the over summer months, but these months are more a period of consolidation ahead of the festival seasons," he added. Palladium rose modestly, while the platinum price steadied, with both having posted declines on Wednesday after data showed US vehicle sales slowed far more than expected last month.
The US car market, the world's second-largest after China, is a key source of demand for palladium, which is used in catalytic converters in gasoline-powered vehicles. Palladium was last up 1 percent at $773.72 an ounce, having fallen by nearly 1 percent on Wednesday, while platinum was flat at $1,814.74, having shed 0.7 percent in the previous session.
"Over half of physical PGM production is absorbed by the auto sector and the health of the US auto market is an important influence on PGM prices," said HSBC in a note. Silver was last up 0.3 percent at $36.86 an ounce, partially reversing Wednesday's 4.3 percent drop.