Gold eased on Thursday after rising to its strongest in a week in the previous session as strong demand for Portugal's bond sale eased concern over the debt crisis in Europe. Investors awaited debt auctions by Spain and Italy later in the day and the release of US jobless claims after a recent pick up in US economic data prompted some economists to beef up growth forecasts for the first half of 2011.
Spot gold fell $1385,80 to $1,42/oz by 02:26 GMT after rising as high as $1 388,90 on Wednesday as the US dollar dropped against the euro.
"The safehaven demand for gold may recede temporarily. I would think that gains in gold for the day ahead may be difficult to sustain," said Phillip Futures investment analyst Ong Yi Ling in Singapore.
Gold was off a lifetime high around $1 430 struck in early December, when fears the debt crisis in Europe would spread ignited buying from investors. But Wang Tao, a Reuters market analyst for commodities and energy technicals, said gold was poised to rebound more to $1 407/oz, as indicated by an inverted head-and-shoulders pattern. Activity in the physical market had yet to pick up, but dealers noted some buying from main consumer India ahead of a harvest festival later in January.
"There's light selling but the market is otherwise quiet," said a physical dealer in Singapore.
Premiums for gold bars were at two-year highs in Singapore and Hong Kong.
US gold futures for February hardly moved, at $1 385,5/oz.
The euro traded at one-week highs on Thursday after a breach of its 200-day moving average sent bears scrambling to cover short positions, though further gains could be hard to come by ahead of bond sales from Spain and Italy.
Portugal is seen as the next euro zone candidate that will need a bailout, but passed a key market test on Wednesday by selling a benchmark 10-year bond at a lower yield than in the previous auction and drawing strong demand.
German Finance Minister Wolfgang Schaeuble said on Wednesday euro zone countries were working on a "comprehensive package" to solve the bloc's debt crisis, which could be agreed by February or March.
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