The price of gold dropped sharply on Thursday in early U.S. trading and moved to its lowest level in nearly two weeks. Gold for November delivery moved to $856.70, down $30.60 on the session. Prices have been volatile in recent days amid the financial turmoil that has gone global.
Gold's hedge appeal was reduced as the Senate passed a sweetened $700 banking bailout package by a comfortable margin. Still, the bill must come before the House of Representatives, leaving investors in a very cautious mood.
On the economic front Thursday morning, the Department of Labor's weekly report showed that jobless claims rose to 497,000 from the previous week's revised figure of 496,000. Economists had expected jobless claims to fall to 475,000 from the 493,000 originally reported for the previous week.
The dollar extended its yearly high against the euro as ECB President Jean-Claude Trichet said recent economic data clearly confirms that economic activity in the euro area is weakening amid tighter financing conditions. The ECB left its interest rates unchanged for the third straight month in October, as expected, but many think rates could fall in the coming months.
In other metal trading, silver for December delivery dropped 97 cents to $11.80 an ounce and copper added 4.85 cents to $2.741.
Crude oil continued to plunge on Thursday, further diminishing gold's hedge appeal. Light sweet crude for November delivery moved to $95.77, down $2.76 for the session.
The price of gold turned higher again on Wednesday and finished higher by $6.50 on the session. Gold dropped away from a two-month high on Tuesday, closing down $13.60. The precious metal's hedge value took a hit as the U.S. dollar saw its largest one-day gain ever versus the euro.
The metal closed higher on Monday and then surged in post-market trading after the House failed to get the necessary 218 votes to pass a $700 billion rescue plan. December gold closed at $894.40 an ounce, up $5.90 on the session. After the metal markets closed, gold moved as high as $915.30 as traders flocked to the safety option.