Investing.com -- Gold posted modest gains on Thursday amid a weaker dollar, on a thin day of trading in the final session before the Christmas holiday.
On the Comex division of the New York Mercantile Exchange, gold for February delivery traded in a tight range between $1,069.30 and $1,076.40 an ounce, before settling at $1,076.10, up 8.00 or 0.75% on the session. Following several days of choppy, volatile trading last week marked by wild fluctuations in metal prices, gold has stabilized throughout the abbreviated week. The precious metal closed on Thursday only several percentage points below its level toward the end of last week after the Federal Reserve abandoned a seven-year zero interest rate policy by approving its first rate hike in nearly a decade.
Gold likely gained support at $1,046.20, the low from December 3 and was met with resistance at $1,179.10, the high from Oct. 20.
On Thursday, the U.S. Department of Labor's Bureau of Labor Statistics (BLS) said initial claims for state unemployment benefits fell by 5,000 to a seasonally-adjusted 267,000 for the week ending on Dec. 18. The number of initial claims dipped to near 45-year lows, falling to levels last seen in late-1973. Analysts expected new claims to decelerate slightly by 1,000 to 270,000 on the week. Last Wednesday, Fed chair Janet Yellen cited a tightening labor market that is nearing full employment as the primary factor in the Fed's decision to raise its benchmark Federal Funds Rate.
Investors continued to digest solid inflation data from Wednesday's session for further indications on when the Federal Open Market Committee (FOMC) could approve its next rate hike. On Wednesday morning, the U.S. Department of Commerce's Bureau of Economic Analysis (BEA) said the Personal Consumption Expenditure (PCE) price index increased by 0.4% on a yearly basis last month, above 0.2% annual gains in October. The Core PCE index, which strips out volatile food and energy prices, inched up by 0.1% last month, in line with consensus estimates.
Over the last year, core prices are up 1.3%, unchanged from October's reading. Core PCE prices, the Fed's preferred gauge for inflation, have fallen below its targeted goal of 2% for every month over the last three years. Yellen expects long-term inflation to move toward the Fed's targeted objective, as temporary factors from a stronger dollar and dwindling oil prices fade.
At last week's historic meeting, the FOMC projected that the upper-bound range for the Fed Funds Rate will increase a full percentage point to 1.5% by the end of 2016. The estimates imply that the FOMC could approve four modest rate hike throughout the course of next year. On Thursday, the CME Group's (O:CME) Fed Watch calculated the probability of a March rate hike at 50.3%, down from 53.6% a session earlier.
Gold, which is not attached to dividends or interest rates, struggles to compete with high-yield bearing assets in rising rate environments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell by more than 0.40% to an intraday low of 97.96. Earlier this month, the index eclipsed 100.00 to reach its highest level in more than 12 months. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
With only four sessions remaining in 2015, gold is on pace to tumble nearly 9% on the calendar year, as it hovers around six-year lows. The precious metal has encountered severe headwinds over the course of the year from the Fed's policy shift, a sharply appreciating dollar and a perception that it has lost some of its appeal as a safe-haven asset.
Silver for March delivery rose 0.078 or 0.55% to close at 14.355 an ounce.
Copper for March delivery fell 0.003 or 0.13% to 2.122 a pound.