* Gold extends decline for fourth day in a row
* Dollar firms versus euro after raft of upbeat data
* Markets eye key December U.S. payrolls data due Friday
(Updates prices)
By Jan Harvey and Amanda Cooper
LONDON, Jan 6 (Reuters) - Gold prices fell for a fourth
successive session on Thursday, under pressure from investors
taking heart from the strength of the dollar following a string
of data that suggested the U.S. economy was gaining traction.
Spot gold <XAU=> was bid at $1,368.10 an ounce at 1600 GMT,
against $1,377.65 late in New York on Wednesday. U.S. gold
futures for February delivery <GCG1> were down 0.4 percent at
$1,368.60.
A string of robust U.S. data have driven the dollar higher
on expectations the United States may recover faster than other
major economies. The numbers have raised expectations that
Friday's key jobs data will be positive. []
A larger-than-expected rise in weekly initial jobless claims
on Thursday did little to dispel this notion, putting gold under
pressure against the dollar and undermining its appeal as a
shelter from risk. []
"Really, what's behind this correction is probably the
stronger U.S. economic data," said Mitsubishi analyst Matthew
Turner. "There is always the fear that once the rebound in the
U.S. gets cemented and attracts higher interest rates, investors
start shifting money out of gold and into equities."
"This fear that government debt and deficits will require
loose monetary policy for a longer time was the driving force
behind gold's rally and that hasn't changed," he said.
RISING RATES
U.S Treasury yields <US10YT=RR> have risen by a full
percentage point in the last two months alone as investors have
readjusted their expectations for U.S. growth and inflation.
Given that gold is a non-interest bearing asset, the
opportunity cost of holding it falls when rates are low.
"That is creating some pressure in that market, but I think
it is very unlikely to be sustained," said Deutsche Bank analyst
Daniel Brebner.
"Ultimately the risk of higher interest rates this year is
very, very low. There are still lots of risks to growth."
European shares extended their new-year rally, reaching
their highest since September 2008 after the U.S. data.
Oil prices slipped to hover around $90 a barrel after the
rise in initial jobless claims, while in base metals, aluminium
<CMAL3> hit its highest since September 2008 on the London Metal
Exchange. [] [] []
From a technical perspective, gold's correction from the
record high it hit in December is seen as potentially healthy.
"We are happy that gold is unwinding from overbought
momentum conditions as it allows for further longer-term upside
progression, in line with our underlying bullish view," said
Barclays Capital in a note.
"We would look to build long positions in the $1,360 area...
in anticipation of gains through the $1,432 all-time high to our
initial upside targets at $1,460/1,480... Below the $1,350/1,340
area would force us to reconsider our near-term positioning."
Investment demand for gold-backed exchange-traded funds
remained lacklustre, with holdings of the world's largest gold
ETF, New York's SPDR Gold Trust <GLD>, dropping by nearly 4
tonnes on Wednesday to their lowest in early June. []
Although the appetite for gold as a safe store of value is
likely to remain supported by concerns over euro zone debt
levels, the U.S. deficit and potentially strong inflation in
emerging markets, the precious metal could be at risk of
extending its short-term correction.
"Market sentiment is shaken, and next week's rebalancing of
the commodity index looms large; how much is already priced in
is up for debate," said UBS in a note.
"Silver will be one of the biggest losers in the index
rebalancing, but commodity contagion has caused the other
precious metals to suffer."
"In the midst of a short-term commodity depression, a
stronger dollar and, more importantly, growing conviction in the
U.S. recovery as macro data improves, gold is struggling to
assert itself," UBS added.
Among other precious metals, silver <XAG=> was at $29.03 an
ounce against $29.24, platinum <XPT=> was at $1,726.99 an ounce
versus $1,726.50 and palladium <XPD=> at $758.47 against $773.
(Editing by James Jukwey)
