Gold falls as strong dollar, profit-booking weighs

Gold traded just above intraday lows on Friday morning, pressured by a stumbling euro as risk sentiment swung lower and investors decided to book profits amid end-of-week activity and the US Thanksgiving holiday.

But simmering macroeconomic and geopolitical fears - although not as prevalent as they were earlier in the week, when the Irish bailout and military tensions on the Korean peninsula grabbed the headlines - have limited losses.

Spot gold was last at $1,366.90/1,367.70 per ounce, down $5.20 from the previous session and just off a session low of $1,365 - it remains within the broad $1,365-$1,380 range of recent sessions, as investors await news of economic developments in the eurozone and diplomatic tensions in Southeast Asia.

On the charts, next resistance stands at the uptrend line of $1,373 and $1,377 and then further out to the all-time peak of $1,424.60 hit earlier this month. Support is pegged at $1,362 and $1,356.

Precious metals could be prone to price swings today as fund activity kicks in, analysts said, although store-of-value purchasing should keep prices well supported.

"Extended Thanksgiving holidays will probably keep trade thin and the complex remains vulnerable to further pressure as traders look to lock in profits and maintain cash positions to cover margin requirements," analyst James Moore of FastMarkets said.

"But we expect gold and, to a lesser extent, silver to remain underpinned by investment bargain hunting as investors look to diversify against the volatile macroeconomic and geopolitical background," he added.

Markets remain concerned over the threat of sovereign debt contagion in Europe - the cost of insuring against Irish Portuguese, Spanish and Greek debt rose again in the previous session.

Ireland released details earlier this week of a proposed 85-billion-euro EU/IMF package as well as a 15-billion-euro spending cut programme.

Fears linger over a potential ratcheting up of Korean hostilities, although there has been no further military action since shell attacks by both sides on Tuesday. But North Korea said overnight that imminent military drills by the US and South Korea are pushing the two countries to "the brink of war”. This has provided gold with additional support on the dips.

Data this morning did little to assuage investor fears over the health of European economies - German import prices were down 0.2 percent in October when growth of 0.2 percent was forecast. Import prices had risen 0.3 percent in the previous month.

And French consumer spending fell 0.7 percent in October - a 0.2-percent advance had been expected following the 1.6-percent rise in September.

Overnight, Japanese CPI data showed yet another fall in October, down 0.6 percent and in line with expectations. This renewed deflationary fears but was an improvement from the 1.1-percent decline of the previous month.

In a light day for data due to the Thanksgiving holidays, only German preliminary CPI data for November is expected later.

The euro fell to its lowest since September 21 this morning at 1.3215 as risk appetite once again took a tumble. But it steadied later and was last at 1.3238, still around a cent lower from the previous session.

And European equity markets also declined on domestic economic fears after falls in Asia overnight, ranging between 1.3 percent and 1.8 percent lower.

Elsewhere, silver shed 34 cents to $27.17/27.22 per ounce. The platinum group metals (PGMs) suffered as wider risk appetite dissipated - platinum was last indicated at $1,642/1,648 per ounce, a $17 decline, while palladium shed $24 or 3.4 percent to $676/682.

"Given the light data calendar today, the more cyclical platinum and palladium markets are likely to take cues from broader market sentiment," broker Credit Suisse said.

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