Gold (GC-FT1,004.90-4.40-0.44%) was marginally softer on Thursday, weighed as the dollar arrested its fall, but prices held on above key support at $1,000 with investors content to stay sidelined ahead of U.S. manufacturing and housing data.
Spot gold stood at $1,005.30 per ounce at 10:36 GMT, compared with $1,006.70 late in New York on Wednesday.
U.S. gold futures for December delivery fell $2.00 to $1,007.00, after rising 1.5 per cent on Wednesday.
In other precious metals, silver (SI-FT16.61-0.05-0.29%) was flat at $16.59, while platinum (PL-FT1,300.00-2.90-0.22%) fell to $1,290.50 from $1,295.50 and palladium (PA-FT292.30-6.90-2.31%) eased to $292.50 from $293.50.
“Gold picked up reasonably strongly yesterday on dollar concerns, but that doesn't seem to have had much of impact today – there's a bit of a holding of breath to see what happens next with the data due out today,” said David Wilson, metals analyst at SocGen in London.
Analysts said that with currency movements seen as the main driver, major direction should come in the wake of dollar reaction to U.S. consumption data at 12:30 GMT, plus manufacturing data and pending home sales figures at 14:00 GMT.
Data showing a pick up in consumption could see the dollar sold as investors gain confidence about picking up riskier assets. A weaker dollar would make dollar-priced gold cheaper for non-U.S. investors. The dollar was last up 0.4 per cent against a basket of major currencies.
Dollar weakness, concerns about potential inflation and technical momentum saw gold prices rise some 8.7 per cent in the three months to September, producing its strongest performance since the first quarter of 2008.
The latest rally also took prices to within a few dollar's of the March 2008 record high at $1,030.80.
HSBC metals analyst James Steel said in a note to clients that the market's ability to stay at or near $1,000 was impressive.
“During previous penetrations of $1,000/oz, gold prices corrected significantly and remained well below $1,000/oz for months afterwards,” Mr. Steel said.
“We believe the deterioration of the USD combined with a gradual increase in investor risk appetite, is propelling gold prices higher. Gold appears poised to challenge all-time highs of $1,030/oz.”
But while investors have been happy to go with current momentum, some unease remains over the market's fundamental picture and the extent of speculative long positioning.
“To me this rally seems to be a little artificial. There's been a lot of speculative interest but it's difficult to see what the key driver is,” SocGen's Mr. Wilson said.
“Macro-wise I can't see any significant reasons supporting gold. The data seems to still suggest that we're in quite a significant deflationary environment,” he added.
On investment, the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings rose 1.22 tonnes to 1,095.327 tonnes on Wednesday.
It was the first rise since Sept. 21, when the holdings rose by 15.256 tonnes to top 1,100 tonnes on a fall in gold prices to around $995 per ounce.
