NEW YORK/LONDON: Gold fell 1 percent on Thursday on encouraging US economic growth data, but it sharply pared losses as an increase in business inventories fueled speculation the Federal Reserve has to keep its bond-buying stimulus for now.
Trading was extremely choppy. Bullion fell as much as 2 percent earlier in the session, but prices recovered as participants adjusted positions ahead of Friday's all-important November US nonfarm payrolls, traders said.
Data released on Thursday showed the US economy grew faster than initially estimated in the third quarter and that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, but underlying domestic demand remained sluggish, buoying the case for the Fed to stay with its $85 billion bond-buying stimulus.
"When gold climbed to the higher end of a recent range earlier today, there was a lot of algorithmic trading which drove prices lower," said Jeffrey Christian, managing director of commodities consultant CPM Group.
"We are in an extremely volatile market with a great deal of uncertainty."
Spot gold was down 1.1 percent at $1,229.69 per ounce by 2:05 p.m. EST (1905 GMT), sharply off a low of $1,216.84 earlier in the session.
US Comex gold futures for February delivery settled down $15.30 at $1,231.90 an ounce, with trading volume on track to finish in line with its 30-day average, preliminary Reuters data showed.
Bullion gained the most in more than a month on Wednesday as investors aggressively bought back their bearish bets on fears of higher prices.
Holdings in SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, fell 2.70 tonnes to 838.71 tonnes on Wednesday, the lowest since early 2009.
On the mining front, the incoming chairman of Barrick Gold Corp, John Thornton, said he would consider a hedging strategy, given the volatility in the price of gold, but this did not mean Barrick was poised to change tack on the issue.
In other metals, silver followed gold's moves and was down 1.1 percent at $19.45 an ounce. Platinum fell 0.8 percent to $1,356.99, while palladium rose 0.8 percent to $730.50.
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