SINGAPORE: Gold inched down on Thursday, pulling further away from a one-month high hit earlier in the week, as increasing confidence in the global economic recovery dulls bullion's appeal as a safe-haven investment.
Gold has failed to breach key resistance at $1,700 an ounce over the last few days, lacking fresh impetus as a generally improving economic outlook steers investors towards riskier assets.
Growth in China's massive manufacturing sector accelerated to a two-year high in January, the HSBC flash purchasing managers' index (PMI) showed on Thursday, adding to signs of a rebound in the world's second largest economy.
The Jan. 28 expiry of COMEX options contributed to the stagnation in prices, as a large open interest on a $1,700 strike kept prices sticky, traders said.
Spot gold had inched down 0.2 percent to $1,682.44 an ounce by 0346 GMT, off a one-month peak of $1,695.76 hit on Tuesday.
US gold lost 0.3 percent to $1,682.50.
Market participants are also waiting for a US Federal
Reserve policy meeting next week, which could shed light on the future of its ultra-loose monetary policy, which has been a main driver of gold prices in the past two years.
"We have the FOMC (Federal Open Market Committee) and non-farm payrolls data, which could shake this market out of its technical trading doldrums," said a Singapore-based trader.
Gold has been moving in a range between roughly $1,680 and $1,695 for the past week, lacking momentum to move either way as investors weigh the continuously easing monetary stance against a slowly improving economy.
Technical analysis suggested that spot gold may fall into a range of $1,665.94-$1,669 an ounce during the day, as a corrective wave cycle that started at the Jan.4 low of $1,625.79 has completed, said Reuters market analyst Wang Tao.
"As long as we don't see any trend for tightening monetary policy, gold is unlikely to fall much," said a trader based in the eastern Chinese province of Zhejiang.
"But current levels are too high to buy. I bought some at $1,650 and probably will sell when prices rise to $1,750."
Physical orders continued to flow in from China, which is gearing up for the Lunar New Year holiday in February, when gold jewellery and bars are popular gifts, traders said.
Holdings of SPDR Gold Trust, the world's top gold-backed exchange-traded fund, eased slightly to 1,334.115 tonnes, down 16.7 tonnes so far this year, but still up more than 6 percent from a year earlier.
Spot silver dropped 0.7 percent to $32.03 an ounce, taking a breather after an eight-day rally, the longest winning streak since April 2011 when prices marched to a record high near $50.
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