"There is a preference for riskier assets and interest-bearing assets. We've seen a better tone to equity markets. Gold is on the flip side of this move," Andrew Cole, fund manager with Baring Asset Management, said. Spot gold was at $1,694.64 an ounce at 1522 GMT, little changed from $1,693.41 an ounce late on Wednesday, while US gold futures for December delivery were up 0.29 percent an ounce at $1,698.70. European stocks held near their highs for the year and the euro extended its declines against the dollar to trade below $1.30 on Thursday after comments from European Central Bank President Mario Draghi stoked expectations of an interest rate cut.
Gold investors are awaiting direction from non-farm payrolls data on Friday, and next week's Federal Reserve policy meeting, as well as clearer signals on how the United States will deal with negotiations over its upcoming "fiscal cliff." That refers to the possibility that a $600 billion package of tax hikes and spending cuts due to kick in the New Year could push the world's biggest economy back into recession.
"We have the ECB decision today, with some (talk) of Spain applying now for financial help, and furthermore we have the Fed decision," LGT Capital analyst Bayram Dincer said. Gold priced in euros slipped into oversold territory after falling nearly 2 percent this week, posting its biggest one-day decline in six months on Wednesday and touching its lowest since mid-July at 1,288.85 euros an ounce.
Its 14-day relative strength index stood at 28.9 on Thursday, with any reading less than 30 considered to signal oversold conditions. Investors' appetite for physical gold and physically backed investment products remained sharp, with holdings of the largest gold exchange-traded fund, New York's SPDR Gold Trust, at a record high.
Demand in India, historically the world's biggest buyer of gold, was also firm as prices fell to their lowest in a month, weighed by a stronger rupee and a decline in spot prices. The Russian Gold Industrialists' Union raised its 2012 gold production forecast by 2 percent to 222 tonnes (7.14 million troy ounces), the lobby said on Thursday. From a chart perspective, further losses in gold could take prices down to support at its November low at $1,672.50 an ounce, and its 200-day moving average at $1,660.
Among other precious metals, silver was up 0.73 percent at $33.08 an ounce. Silver has lost some ground to gold so far this month, with the gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, edging further from last week's near eight-month low at 50.42 to 51.6 on Thursday. Spot platinum was up 0.67 percent at $1,586.5 an ounce, while spot palladium was up 1.44 percent at $692.3 an ounce.