Gold declines to 4 month low; EU pledges to tackle inflation, USD mixed

Gold futures on the COMEX Division of the New York Merc Thursday dived to the lowest level since October 2010, after an official of the European Central Bank (ECB) pledged to cool down inflation.

The most active Gold contract for Febr delivery shed 14.6, or 1.1%, to settle at 1,318.4.

Lorenzo Bini Smaghi, a member of the Executive Board of the European Central Bank (ECB), said that sharper rises in prices of imported goods carry an inflationary threat that could no longer be ignored, reinforcing the view that the ECB could raise rates sooner than expected.

Market players noted that investors rushed to sell Gold holdings in anticipation of lessened inflation worries, as Gold is often seen as the ultimate symbol of wealth, and a sure beneficiary of unbridled price increases.

Hammered by apparent economic recovery around the World, the Gold price has lost 7% so far this year, after ending Y 2010 with a 30% gainer.

One trader noted that the Gold market remains vulnerable to more backing and filling (profit taking). The Gold market might also remain off balance because of talk of excessive speculation in commodities at the Davos Forum.

However, some analysts hold optimistic POV toward Gold price in the long run, as a number of Key long-term investment drivers remain intact.

Silver for Mar delivery lost 9.7c, or 0.36%, to 27.031 oz. and April Platinum rose 6.6, or 0.37%, to 1,803.5 oz.

US Crude Oil price dropped Thursday, as US weekly jobless claims turned out larger than expected, hurting investors' confidence about the economy.

The US Labor Department said on Thursday that the number of people applying for jobless benefits spiked by 51,000 to 454,000 last week, much larger than economists' previous estimate of a rise to 408,000. The agency claimed the increase was partly attributed to snowstorms in early January.

Also, US durable-goods orders in December failed the markets' expectation. The Commerce Department said orders fell 2.5%, while economists had expected a 1% rise. The weekly report by the Energy Information Administration said US commercial oil storage rose in the week ended January 21, which also pressured Crude's price.

Light, sweet Crude for Mar delivery lost 1.69 to 85.64 bbl on the New York Merc.

The USD traded mixed against major currencies in late New York trading Thursday as initial jobless claim in US last week rose unexpectedly, hurting investors' faith in the economy.

The Euro rose to a 2 month high of 1.3760 vs the USD in mid-day trading session Thursday.

The Greenback rose against the Japanese Yen as Japan's sovereign debt rating was downgraded.-Paul A. Ebeling, Jnr. www.livetradingnews.com