Gold ends lower, logs sixth loss in eight sessions

Gold futures finished lower Wednesday, pulling back after a nearly $21-an-ounce gain in the previous session, with investors favoring the U.S. dollar over gold after the European Central Bank’s loan offer to euro-area banks.

Prices held above $1,600 an ounce, however, as uncertainty around the region’s debt crisis and inflation outlook remained.

Gold for delivery in February  fell $4, or 0.3%, to settle at $1,613.60 an ounce on the Comex division of the New York Mercantile Exchange. Prices have now tallied losses in six out of the last eight trading sessions.

On Wednesday, the ECB loaned $641 billion to 523 euro-area banks in a massive three-year funding operation. The figure came in well above a Reuter’s forecast for $408 billion.

“Gold thrives on inflation, central bank and interest rate chaos,” said Richard Hastings, a macro strategist at Global Hunter Securities. “The ECB loan commitments reduced the chaos factor, leaving us with not enough inflation in the USA and a lack of clarity regarding inflation in the ECB.”

The move in gold came as the dollar index, which measures the U.S. unit against a basket of six global currencies, traded at 79.954, down from an earlier high of 80.102, but up from 79.826 in North American trade late Tuesday.

A stronger greenback tends to dull buying in dollar-priced commodities, including metals, as it makes them more expensive to holders of other currencies.

Gold was unfazed by U.S. economic data released Wednesday.

A revision to existing-home sales figures from the National Association of Realtors showed that an average of 14% fewer existing homes were sold annually between 2007 and 2010. But NAR also reported that existing home sales rose 4% in November to a seasonally adjusted annual rate of 4.42 million.

Pressure mounts

Gold has been pressured in recent months, with its safe-haven appeal waning as investors flock to the dollar and U.S. bonds amid Europe’s deepening sovereign-debt crisis.

Year-end selling by funds and tight liquidity in European interbank money markets have also contributed to recent price falls.

Anne-Laure Tremblay, precious metals analyst at BNP Paribas, said increases in liquidity by central banks should support gold prices in 2012 and possible rises in inflation expectations.

“Gold should also be boosted by strong physical demand, notably in Asia and Europe,” Tremblay said.

However, she added that “with high uncertainty likely to remain a major feature of the markets, gold could be vulnerable to further episodes of price correction.”

BNP Paribas forecasts that gold will average $1,775 an ounce in 2012 and $2,150 an ounce in 2013.

Other metals

The broader metals complex saw mixed trading, with copper and palladium moving higher.

March copper added 3 cents, or 0.7%, to end at $3.40 a pound and March palladium  rose $5.50, or 0.9%, to $634.10 an ounce.

March futures for silver  shed 29 cents, or 1%, to $29.25 an ounce. January platinum futures  lost $1.20, or 0.1%, to $1,431.70 an ounce. – MarketWatch

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