Gold falls on profit-taking, US data

GOLD declined today as investors cashed in gains amid a downgrade of Portugal's sovereign debt rating and upbeat US economic data.

The thinly traded December contract settled down $US6.80, or 0.1 per cent, at $US1380.00 a troy ounce on the Comex division of the New York Mercantile Exchange. The most actively traded contract, for February delivery, settled down $US6.90, or 0.1 per cent, at $US1380.50.

Credit ratings agency Fitch cut Portugal to A+ with a negative outlook. Gold saw little upside from the decision despite the report stoking investor concerns about Europe's sovereign-debt crisis.

"The Portuguese have always been large holders of gold," and some investors worry the country could sell off a large amount of gold stock in a move that will disturb the market, said George Gero, vice-president with RBC Capital Markets.

Gold futures continue to slip amid thin trading volumes today. Comex gold trading volumes have declined for four consecutive trading sessions and were at 72,534 lots in the previous session, less than half of last Thursday's 208,180 lots.

Gold prices have declined about 3 per cent from record highs of $US1432.50 set on December 7 as investors cashed in their gains ahead of the year's end.

"For now, you're range-bound and kind of stuck," said Scott Meyers, broker and futures analyst at Pioneer Futures.

Two modestly upbeat economic reports also weighed on gold prices.

The number of US workers filing new claims for unemployment benefits fell by 3000 to 420,000 in the week ended December 18, the Labour Department said, outpacing the 2000 decline forecast by economists surveyed by Dow Jones Newswires.

The better-than-expected figure is another sign the US labour market is on its way to recovery.

The upbeat data are considered negative for gold as investors tend to shed the safe-harbour asset as economic sentiment and risk tolerance improves.

US consumer spending showed modest 0.4 per cent increase in November after an upwardly revised 0.7 per cent gain in October, the Commerce Department said. Economists surveyed by Dow Jones Newswires forecast a November increase of 0.5 per cent.

Meanwhile, US incomes grew by 0.3 per cent in November compared with an expected 0.2 per cent gain.

"The economic news was mildly bullish and there's position squaring ahead of the holidays, but I don't think you can read into it," said Mr Meyers.

"We'll get a sense of where the money is going in the first two weeks of next year."

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