London - Gold prices eased on Thursday as better-than-expected euro zone business activity data lifted stock markets from early lows, while the dollar index held near its highest in a week and demand for the physical metal softened.
Spot gold was down 0.1 percent at $1,239.50 (R13,585) an ounce at 11:36 SA time, while US gold futures for December delivery were down $5.60 an ounce at $1,239.90.
European stocks ticked higher after data showed euro zone businesses were performing much better than expected this month, albeit by slashing prices again.
The dollar index held near the previous day's one-week high, though the euro edged higher.
While equities remain under pressure, they are now well off the lows they hit last week after posting their biggest one-day slide in almost four years.
“We are in this phase when the markets are closely watching the economic backdrop and the actions of central banks,” Julius Baer analyst Carsten Menke said.
“If markets get confirmation that the backdrop is (improving), that should be positive for the equity markets, because it points towards a supportive business environment, while it should further weigh on safe-haven demand for gold and reduce investors' willingness to pay for gold as insurance.”
Improving appetite for other assets helped take gold further from a six-week high of $1,255.20 reached earlier in the week when fears mounted over an economic slowdown across China, Europe and the United States.
A drop in holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, suggested investment appetite for the metal was softening.
Holdings in the fund fell 0.3 percent on Wednesday to 749.87 tonnes, the lowest level since late 2008.
Outflows from the fund this week have now topped 11 tonnes, the most of any week since mid-September.
“We're still having outflows from physically backed gold funds; since the beginning of the year we've had 90 tonnes,” Natixis analyst Bernard Dahdah said.
“Western investors are still not terribly excited about holding gold.”
ASIAN DEMAND SOFTENS
Interest in precious metals in Asia was muted overnight after the dollar strengthened on Wednesday, precious metals house MKS said in a note.
“There was marginal physical interest from China to move gold up to a session high ... but the demand was short-lived and the lack of follow-through buying had the yellow metal back towards the session low in afternoon trade,” it said.
“The recent physical support we have been seeing from India has now waned as they celebrate during their festival season.”
Among other precious metals, silver was up 0.1 percent at $17.08 an ounce, while spot platinum was down 0.4 percent at $1,253.50 an ounce and spot palladium was down 0.6 percent at $762.75 an ounce.
Full production at Anglo American Platinum's strike-hit Rustenburg, Union and Amandelbult mines in South Africa resumed a month ahead of schedule in September as operations bounced back from a five-month strike, the company said on Thursday.
The five-month wage strike by the Association of Mineworkers and Construction Union (Amcu), which ended in June, cost the company 424,000 ounces in lost production and it lost a further 108,000 ounces in the subsequent ramp-up. - Reuters