Comex gold gives back gains due to euro rebound, improvement in global economic landscape

Gold on the Comex division of the New York Mercantile Exchange moved into negative territory on Wednesday as risk appetite returned to the market following the release of positive macroeconomic data out of China and US.

Gold futures for February delivery were recently trading down 70 cents at $1,385.40 per ounce; however, the yellow metal earlier moved as high as $1398.30.

The fact gold started the day in positive territory at all was a little bit surprising given the preponderance news that should be bearish for gold prices, Tom Pawlicki, an analyst with MF Global, said.

"There's been an increase in risk appetite due to the better-than-expected Chinese PMI numbers and improved ADP payroll numbers out of the US. Gold should be lower today but there are still people who want to get into this market and that's created investment momentum," Pawlicki said.

China's purchasing managers' index (PMI) rose to a 7-month high in November. That eased some investors' concerns about a possible slow-down in Chinese industrial demand.

In the US, employment increased by 93,000 in November, after a revised 82,000 increase in October, according to ADP Employer Services. That represents that most hires since November 2007 and easily beat expectations of a gain of about 70,000 jobs.

Additionally, gold imports into Turkey fell about three tonnes in November from around nine tonnes in October, the Istanbul Gold Exchange reported.

Meanwhile, China produced 28.735 tonnes of metal in October, down 5.3 percent from September but nine percent more than in October 2009.

"Turkish gold imports are down, Chinese gold production is up. We're seeing weak demand and strong supply, but gold still rallied earlier this morning," said Pawlicki.

Also, the euro increased to 1.3112 from 1.2986 against the dollar soon after ECB president Jean-Claude Trichet said that investors are "are tending to underestimate the determination of governments" when it comes to stabilizing the eurozone and combating contagion of the sovereign-debt crisis.

But fund managers are still taking a cautious approach towards Europe's finances, so gold's attractiveness as a safe-haven asset remains in tact, traders said.

Gold is also being supported by news that China's Lion Fund Management Co has obtained approval China Securities Regulatory Commission to launch the country's first fund that could invest up to $500 million in gold-backed ETFs outside of China.

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