Gold turns higher despite negative economic forecast

Investing.com - Gold futures turned higher during U.S. afternoon hours Thursday, despite European Central Bank President Mario Draghi maintained a downbeat outlook on the euro zone economy.

Market players also continued to monitor negotiations among U.S. lawmakers to avoid the looming “fiscal cliff” crisis, while looking ahead to Friday’s key U.S. nonfarm payrolls data.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,700.55 a troy ounce during U.S. afternoon trade, up 0.39% on the session. 

Prices fell by as much as 0.35% earlier in the day to trade at a session low of USD1,687.35 a troy ounce. 

Gold prices were likely to find support at USD1,672.55 a troy ounce, the low from November 5 and resistance at USD1,708.25, the previous day’s high.

Speaking at the ECB’s post-policy meeting press conference, Draghi said that risks to the outlook remain weighted to the downside. 

Policymakers now expect 2012 gross domestic product to shrink between 0.6% and 0.4%, while GDP is expected to come in between a 0.9% contraction and growth of 0.3% in 2013.

In September, the ECB had forecast 2013 GDP to range between a contraction of 0.4% and growth of 1.4%.

Draghi’s comments came after the ECB left rates on hold at a record low 0.75% earlier, in a widely anticipated decision.

Gold traders now looked ahead to Friday’s key U.S. nonfarm payrolls data for November, as investors attempt to gauge the strength of the U.S. economy and the need for further monetary stimulus from the Federal Reserve.

Any improvement in the U.S. economy could scale back expectations for further easing, boosting the U.S. dollar and weighing on dollar-denominated commodities.

Data released earlier showed that the number of people who filed for unemployment assistance in the U.S. fell by 25,000 to a seasonally adjusted 370,000.

Meanwhile, investors continued to monitor developments surrounding the fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1, unless a divided Congress and the White House can work out a compromise in the four weeks left before the deadline.

President Barack Obama reassured markets Wednesday, saying that if Republicans accept tax hikes on wealthier Americans, a deal could be pushed through in "about a week."

President Obama said recently that any solution must include spending cuts and raising revenue, including increasing taxes on the wealthiest. Republican leaders say they will agree to higher revenue, but they want to close loopholes or reduce tax breaks rather than raise rates.

Elsewhere on the Comex, silver for March delivery gained 0.39% to trade at USD33.09 a troy ounce, while copper for March delivery plunged 1.17% to trade at USD3.667 a pound.