Gold down on drop in oil prices, bright US outlook

[NEW YORK] Gold fell on Thursday, as another sharp pullback in crude oil prices and improving US jobs data decreased bullion's appeal as a hedge, and continued outflows from gold-backed ETFs suggested the precious metal is susceptible to further losses.

Weighing heavily on the gold market was a nearly 4 per cent drop in oil prices after government data showed US crude stockpiles surged at the delivery point for crude futures. Oil prices have slumped some 30 per cent since Brent hit a June high above US$115 on fears of an oil glut.

Higher US quits rate and new jobless claims remaining near a 14-year low suggest the US job market is moving toward full health, undermining gold's appeal as a hedge against economic uncertainty.

A sell-off since Oct 31 has sent gold sliding below the key technical level of US$1,180 an ounce to a 4-1/2-year low of US$1,131.85, triggering demand for physical metal from price-sensitive buyers. "Physical buyers have responded positively to cheaper prices despite continued liquidations from the gold-exchange traded funds," said James Steel, chief metal analyst at HSBC.

However, sharp outflows in gold exchange-traded funds suggest the metal's price could fall further, Steel said.

Spot gold was down 0.1 per cent at US$1,159.59 by 2:38 p.m. EST (1938 GMT).

US COMEX gold futures for December delivery outperformed spot, settling up US$2.40 an ounce at US$1,161.50.

The dollar was down 0.3 per cent against the euro on Thursday. The US unit fell after New York Federal Reserve President William Dudley said any premature tightening in America's monetary policy could hurt the economic recovery.

A run of relatively firm data had raised expectations that US rates will rise sooner rather than later, pressuring non-yielding gold. That has already largely been priced into the metal, analysts said.

Holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 1.8 tonnes to 722.67 tonnes on Wednesday, the seventh straight day of declines.

Some support was offered by buying of physical gold in China overnight, dealers said.

However, the World Gold Council reported on Thursday that Chinese demand fell heavily in the third quarter, with jewelry demand down 39 per cent and bar and coin buying 30 per cent lower. That helped knock global demand 2 per cent lower.

Silver fell 0.5 percent to US$15.55 an ounce. Platinum was down 0.8 per cent at US$1,187.70 an ounce and palladium dropped 1 per cent at US$763.98 an ounce.

REUTERS