Gold Prices Drift Lower

Updated from 1:19 p.m. EST

Gold prices were modestly lower Thursday as traders took a breather ahead of the government's monthly employment report, one of the key pieces of data on the state of the U.S. economy.

February-dated contracts closed down $3.60 at $626.20 an ounce on the Comex division of the Nymex. The bullion exchanged-traded funds were lower, with streetTracks Gold Shares (GLD Quote) and iShares Comex Gold Trust(IAU Quote) both down a bit less than 1%.

The dollar, which tends to move in the opposite direction to gold, was rallying against the euro as yet more pieces of economic evidence point to a soft landing scenario for the economy. Still, experts are divided, and some believe the domestic economy is slowing down more rapidly.

The Institute for Supply Management's nonmanufacturing index fell to 57.1 for December from 58.9 in November. The report marginally beat consensus estimates of 57. New data on unemployment claims and factory orders were worse than expected but still relatively healthy.

It "suggests that weakness in housing and autos has not spilled over in any significant way into other areas of the economy," writes Randy Diamond, an analyst at Miller Tabak, in a market brief. "Further clues on just how much spillover has occurred will be available in tomorrow's release of the November payroll report."

Foreign exchange traders reacted by bidding up the greenback against Europe's common currency. One euro would buy $1.3088, down from $1.3161 late Wednesday. Elsewhere, the dollar was buying 119.2 yen, down slightly from 119.39 yen previously.

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