Gold cuts gains in London trade

Gold eased on Thursday, under pressure from a rise in the dollar against the yen after US data offered some reassurance on the economic outlook, though bullion was still just 1.5 percent below record highs. Palladium and silver, both of which hit multi-year highs earlier in the day, surrendered some gains after the pick-up in the US currency prompted some investors to close their positions.
-- Palladium hits nine-year peak
-- Silver around 30-year highs
A measure of business activity in the auto-intensive US Midwest outstripped expectations in December, while a housing market report showed pending home sales rose faster than expected last month and a separate release showed jobless claims hitting their lowest in two years.
Gold eased by 0.5 percent to $1,403.76 an ounce by 1639 GMT, yet remained on track to secure its tenth consecutive yearly gain. That compares with a record high of $1,430.95 on Dec. 7. Spot silver eased slightly on the day to $30.41, around 30-year highs after having risen by as much as 1 percent earlier to a session peak at $30.88. The gold/silver ratio, which denotes each metal's relative performance, reached a four-year low.
"These last few days it seems as if silver has been the main driver and gold is just trotting along with a lack of sellers," said Saxo Bank senior manager Ole Hansen. Silver is at its highest since early 1980 and on course for an 83 percent gain this year, its strongest performance in at least 27 years. Investors have flocked into silver this year as a cheaper safe-haven alternative to gold, which hit a record high of $1,430.95 an ounce in early December.
Holdings of silver in the iShares Silver Trust, the world's largest exchange-traded fund backed by physical silver, have risen to 10,903.34 tonnes, from 9,492.97 tonnes at the end of last year, while open interest in US silver futures has risen by 8,801 contracts, or 44.0 million ounces.
Holdings of gold in the SPDR Gold Trust, the world's largest exchange-traded fund backed by physical bullion, have risen 15 percent this year to 1,284.062 tonnes, and a near 20 percent rise in open interest in US gold futures also reflects some of this investor desire to hold gold. The gold price has risen by nearly 30 percent in 2010, its strongest yearly performance since a 31 percent rise in 2007 when the global financial crisis began to manifest itself.
"Overall, I don't think today or tomorrow we are going to have any kind of correction as such," said Afshin Nabavi, MKS Finance head of trading. Palladium was set for a second year of gains, having almost doubled to near $800 an ounce over the course of 2010 and is this year's top performing commodity. Spot palladium rose to a nine-year high of $795.00 before trading back at $791.72, up 0.2 percent on the day, while platinum rose to a session high of $1,767.5, its highest since Nov 11, before falling 0.5 percent to $1,748.24.