Gold close to lowest in nearly six years on stronger dollar

Gold traded near its lowest in nearly six years on Thursday as the dollar held at multi-month highs after US economic data reinforced expectations of an interest rate rise this year.

The US currency was also supported against the euro, weighing on dollar-denominated gold, as European Central Bank officials said they were considering options such as whether to stagger charges on banks hoarding cash or to buy more debt. The ECB meets next week.

Spot gold > was unchanged on the day at $1,070.76 an ounce by 1505 GMT, not far off the $1,064.95 hit last week, its lowest since February 2010.

 

Liquidity was thin, with US markets are shut for the Thanksgiving holiday.

"The sense in the market is that the dollar will continue to rally due to the prospect for QE (quantitative easing) in Europe and the hike in the US," Saxo Bank's head of commodity strategy Ole Hansen said.

"The focus is back to the negative correlation to a stronger dollar and that's keeping gold under pressure."

The dollar was up 0.1% against a basket of major currencies, trading close to an eight-month high reached in the previous session.

"The dollar index is within reach of the multi-year high of 100.39. A break of this level would put downside pressure on gold," ScotiaMocatta said in a note.

Data on Wednesday showed US manufacturing output in October rose well above economists' expectations while business spending plans surged.

Gold had seen some safe-haven bids earlier this week after Turkey downed a Russian fighter jet, stoking tensions between the countries, but interest has faded as investors' focus returned to a US rate rise.

"People are preparing for the rate hike ... if you look at strategists' recommendations of the top 20 trades, gold is not in there," MKS SA senior vice president Bernard Sin said.

In the physical markets, buying interest picked up as gold prices stayed near multi-year lows.

Premiums on the Shanghai Gold Exchange, a proxy for demand in top consumer China, were trading at a healthy $5-$6 an ounce on Thursday, versus $3-$4 at the beginning of the month.

China's net gold imports from main conduit Hong Kong fell in October from a 10-month high reached in the previous month, data showed on Thursday.

Third-quarter gold buying in India, the world's biggest consumer, is likely to fall to the lowest level in eight years, hurt by poor investment demand and back-to-back droughts that have reduced earnings for millions of farmers.

Silver > was up 0.6% at $14.24 an ounce.

Platinum > rose 1.6% to $852 after hitting a seven-year low in the previous session, while palladium > gained 0.9% to $559.