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Gold Settles Below $1,700 On Profit Taking

Gold futures ended lower Thursday, mostly on profit taking as the precious metal erased gains made yesterday after the U.S. Federal Reserve announced a new additional bond purchase program. Meanwhile, uncertainty over U.S. debt negotiations continued even as the fiscal cliff looms around the corner that would include automatic tax hikes and spending cuts beginning January.

Gold for February delivery, the most actively traded contract, shed $21.10 or 1.2 percent to close at $1,696.80 an ounce Thursday on the Comex division of the New York Mercantile Exchange.

Gold for February delivery scaled an intraday high of $1,712.80 and a low of $1,690.70 an ounce.

Gold prices settled higher yesterday, after the Fed announced it will replace its "Operation Twist" program, which expires at the end of the year, with the purchase of longer-term Treasury securities at a pace of $45 billion per month.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 79.95 on Thursday, up from 79.89 in North American trade late Wednesday. The dollar scaled a high of 80.04 intraday and a low of 79.79.

The euro traded higher against the dollar at $1.3077 on Thursday, as compared to $1.3074 late Wednesday in North America. The euro scaled a high of $1.3100 intraday and a low of $1.3042.

In economic news from the U.S., first-time claims for unemployment benefits unexpectedly showed a decline in the week ended December 8. The Labor Department said initial jobless claims dropped to 343,000, a decrease of 29,000 from the previous week's revised figure of 372,000. Economists expected jobless claims to come in unchanged compared to the 370,000 originally reported for the previous week.

Meanwhile, a report from the U.S. Commerce Department showed retail sales to have increased by 0.3 percent in November following a 0.3 percent decrease in October. Economists expected retail sales to increase by about 0.6 percent. Excluding an increase in sales by motor vehicle and part dealers, retail sales were unchanged for the second consecutive month, in line with estimates.

Business inventories in the U.S. increased in line with economist estimates in the month of October, a Commerce Department release showed Thursday. Business inventories rose by 0.4 percent in October following a 0.7 percent increase in September. Nonetheless, business sales fell by 0.4 percent in October after surging 1.2 percent in the previous month.

A U.S. Labor Department release on Thursday showed producer prices for November declined by 0.8 percent following a 0.2 percent drop in October. Economists anticipated prices to dip by about 0.5 percent. The bigger than expected decrease in producer prices was largely due to a sharp drop in energy prices, which tumbled 4.6 percent in November after falling by 0.5 percent in October.

Eurozone finance ministers finally approved the release of a second disbursement of bailout funds to Greece on the completion of the government's debt buyback operation. The group authorized the bailout fund, the European Financial Stability Facility (EFSF), to release the next installment for a total amount of 49.1 billion euros, in several tranches.

Greece will receive 34.3 billion euros in days to follow, with the remaining amount to be disbursed in the first quarter of 2013. The utilization would be about 16 billion euros for bank recapitalization, 7 billion euros for budget financing, and around 11 billion euros to finance debt buyback.

by RTT Staff Writer

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