Gold futures fluctuated between small gains and losses on Thursday during Asian trading after an upbeat regional U.S. factory barometer fueled expectations for the Federal Reserve to continue scaling back its USD75 billion monthly bond-buying program, which supports gold by keeping the dollar weak.
An optimistic take on the global economy by the World Bank, meanwhile, sent investors snapping up stocks, which also came at gold's expense.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded up 0.27% at USD1,241.70 a troy ounce during Asian trading. On Wednesday Gold traded between USD1,240.50 and off a high of 1,242.10.
The February contract settled down at USD1,240.90 on Wednesday.
Futures were likely to find support at USD1,217.80 a troy ounce, the low from Jan. 8, and resistance at USD1,254.70, Tuesday's high.
The Federal Reserve Bank of New York said that its general business conditions index jumped to 12.51 in January from an upwardly revised 2.22 in December. Analysts were expecting the index to rise to only 3.75.
Elsewhere, U.S. wholesale prices beat expectations and firmed the dollar, which tends to trade inversely with gold.
The U.S. producer price index rose 0.4% in December, the biggest increase since June, recovering from a 0.1% decline in November and was also up 1.2% from a year earlier.
Core PPI was up 0.3% in December and rose 1.4% on a year-over year basis, compared to expectations for a monthly increase of 0.1% and an annual gain of 1.3%.
The solid data convinced investors that the Federal Reserve will wind down its USD75 billion in monthly bond purchases as the year progresses.
Bond purchases weaken the dollar by driving down long-term interest rates, and talk of their dismantling tends to strengthen the greenback, thus chipping away at gold's role as a hedge.
Wednesday's economic indicators were the latest convincing investors that the poor December jobs repor was likely a hiccup on the road to recovery.
Separately, the World Bank predicted earlier the global economy will expand 3.2% this year, up from a June forecast calling for 3% growth, which sent investors seeking risk-on asset classes favoring stocks over gold.
Meanwhile, silver for March delivery was up 0.37% and trading at USD20.208 a troy ounce, while copper futures for March delivery were down 0.07% and trading at USD3.352 a pound.