Gold Edges Slightly Higher

GOLD futures have settled near unchanged, edging slightly higher after data showing US inflation remains below the Federal Reserve's target.

The most actively traded gold contract, for February delivery, on Thursday rose $US1.90, or 0.2 per cent, to settle at $US1,240.20 a troy ounce on the Comex division of the New York Mercantile Exchange.

The consumer-price index, a measure of how much Americans pay for goods and services, rose by 1.5 per cent in December from a year earlier, the Labor Department said. Excluding volatile food and energy costs, prices were up 1.7 per cent.

Analysts say that while tame inflation could sap interest in gold as a hedge against rising costs, it may also push the Federal Reserve to reassess the pace of the rollback of its bond-buying program. The US central bank has set an inflation target of two per cent. More muted price rises, along with a potentially slowing labour market, could suggest to Fed officials that the economic recovery isn't strong enough to further reduce its stimulus.

Slowing price rises "may add upward pressure to gold," Standard Bank analyst Walter de Wet said in a note.

Still, many market watchers expect gold to remain under pressure should economic growth remain on track. A separate report on Thursday showed new US claims for unemployment benefits fell by more than economists had expected last week.

The Fed's bond buying programs in recent years have drawn investors, looking for a hedge, to gold. Worries that a recovery in the US economy would spur a reduction in the central bank's bond buying helped send gold prices to a 28 per cent loss in 2013.

"If you see a better economy, the bet is the Fed is going to continue with the reduction in its asset purchases," said Ralph Preston, a market analyst with Heritage West Financial.

Settlements (ranges include open-outcry and electronic trading):

London PM Gold Fix: $1,241.50; previous PM $1,236.00

Feb gold $1,240.20, up $1.90; Range $1,235.80-$1,244.90

Mar silver $20.054, down 8.0 cents; Range $19.970-$20.250

Apr platinum $1,431.50, up $2.90; Range $1,418.20-$1,437.30

Mar palladium $743.90, down 10 cents; Range $738.00-$746.55

Source : News.com