Overall, the session marked a broad-based pullback for metals futures. Only copper managed to buck the bearish trend.
Gold for December delivery GCZ2 -0.88% dropped $17.70 to stand lately at $1,712.30 an ounce on the Comex division of the New York Mercantile Exchange. It had traded down as much as $20.40 on the session, according to FactSet data.
Obama on the so-called fiscal cliff
During a news conference Wednesday, President Obama discusses the approaching fiscal cliff and reiterates the need for bipartisan cooperation.
Selling sentiment in gold keyed off "a weak demand summary from the World Gold Council partly influenced by very tough year-over-year comparisons to the big runup in gold demand associated with the U.S. budget fiasco in August 2011," said Richard Hastings, macro strategist at Global Hunter Securities.
In tonnage terms, global demand fell 11% from the year-ago third quarter as China's appetite for gold investment and jewelry declined, according to the Gold Demand Trends Report released Thursday.
Global demand in the third quarter was 1,084.6 metric tons, down from the record figure of 1,223.5 metric tons seen a year earlier, the report said. In value terms, year-on-year demand dropped 14% to $57.6 billion, with an average gold price of $1,652 an ounce down 3% from the third quarter a year ago.
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Meanwhile, the quarter's global investment in exchange-traded funds jumped 56% from the prior year.
"It is clear from five-year rising demand trends that gold's fundamental property as a vehicle for capital preservation continues to endure, as evidenced by this quarter's increase in global ETF investment ... and continued purchasing by central banks, the ultimate long-term investors," said Marcus Grubb, managing director, investment at the World Gold Council, in a statement. See: Gold demand drops 11% in third quarter.
On the currencies front, the dollar offered little direction for gold. The ICE dollar index DXY -0.05% , which measures the greenback against a basket of six other currencies, edged down to 81.043 from 81.111 late Wednesday.
The report about the slide in global gold demand overshadowed weak U.S. economic data.
Among other things, reports out Thursday showed manufacturing in the New York and Philadelphia regions disrupted by Hurricane Sandy. Also, first-time jobless claims soared to an 18-month high last week, largely a side-effect of Sandy. See: Jobless claims soar after Hurricane Sandy.
Tracking the trading in other metals, silver for December delivery SIZ2 -0.84% traded down 40 cents, or 1.2%, to $32.47 an ounce.
December palladium PAZ2 -1.19% fell $6.35, or 1.1%, to $634.70 an ounce, while January platinum PLF3 -1.23% sank $23, or 1.5%, to $1,568.60 an ounce.
However, December copper HGZ2 +0.30% rose 1 cent, or 0.3%, to $3.46 per pound.
U.S. and Mideast catalysts
In Wednesday's Comex session, December gold rose $5.30 to settle at $1,730.10 an ounce.
GFT Markets technical analyst Fawad Razaqzada equated Wednesday's gains for gold with a search for safe-haven assets.
"Investors are clearly worried about the looming fiscal cliff and are appropriately increasing their bullish positions in precious metals," he said.
Gold needs to close over a resistance level pegged at $1,740 to attract fresh buyers, he said.
HSBC metal analysts expected gold to benefit as long as the fiscal cliff — more than $600 billion of tax hikes and spending cuts due to kick in automatically in January if U.S. lawmakers don't reach a deal — remains high on the radar for investors.
"A lack of progress in resolving the 'fiscal cliff' issue would be gold-friendly, we believe," the analysts said. "The path of least resistance appears higher for bullion."
Typically, gold would "rally on the Israel-Hamas situation and on ominous signs of tension regarding the fiscal cliff," said Hastings.
But "the lingering problem for gold is that even with prices hovering around the $1,700-$1,725 area, this is a bit too high for a bunch of Asia jewelry consumers, thus the outlook for final consumption of jewelry in Asia should be cautious until the results prove otherwise.