Gold off 3-week highs as US data lifts dollar; palladium peaks

Gold prices dipped on Thursday in volatile trade after hitting three-week highs earlier in the session as a set of better than expected U.S data lifted the dollar, while palladium notched a record peak on supply concerns.

Spot gold slipped 0.6 percent to $1,304.90 per ounce as of 12:26 p.m. EDT (1626 GMT), having earlier hit $1,320.22, its highest level since Feb. 28. The metal was set to snap five consecutive sessions of gains.

However, U.S. gold futures were trading 0.2 percent higher at $1,304.40 per ounce.

The number of Americans filing applications for unemployment benefits fell more than expected last week, and other data showed a measure of factory activity in the mid-Atlantic region rebounding sharply this month after heavy falls.

"The data was decent today with Philly Fed noticeably more robust and positive jobs data for the payrolls survey week," said Tai Wong, head of base and precious metals derivatives trading at BMO, adding that caused a momentary dip in gold prices.

"Gold's failure to extend gains above $1,320 has triggered some liquidation from long options positions and also fueled algorithms sensing short term weakness."

Against a basket of currencies, the dollar index rose to 96.32, up 0.6 percent on the day, making dollar-denominated gold more expensive for investors of other currencies. A measure of stocks across the globe rose in a volatile session, led by gains on Wall Street.

"The dollar index is pushing up and weighing on the gold market, equity markets are starting to come back," said Phil Streible, senior commodities strategist at RJO Futures in Chicago.

The U.S. central bank on Wednesday stunned markets by abandoning all plans to raise rates this year, a signal its three-year campaign to normalise policy might be at an end.

Higher interest rates raise the opportunity costs of holding gold, which earns nothing and costs money to store and insure.

Palladium touched an all-time high of $1,620.52 an ounce in the session, and was currently down 0.4 percent to $1,596.50 per ounce.

Analysts attribute this to concerns about a supply crunch in the autocatalyst metal. A possible temporary export ban on precious metal scrap from Russia and hopes of economic stimulus from China have also helped lift prices.

"There is a big deficit of palladium production this year. Until auto-companies switch over to platinum, palladium prices are going to be pretty strong," said Bill O'Neill, partner at Logic Advisors said.

Meanwhile, platinum prices fell 0.8 percent to $852.50 per ounce, having earlier touched a three-week high of $875.15. Silver dropped 0.3 percent to $15.40.