Dollar Rally Spurs Drop in Gold

Gold prices fell again Thursday after better-than-expected economic news boosted the greenback against the European currency.

Benchmark bullion futures were skidding $19.80 at $889.20 an ounce in recent action on the Comex division of the New York Mercantile Exchange.

New claims for unemployment insurance fell much more than expected, while orders for durable goods, such as washing machines, fell less quickly than they did previously. The good news more than offset any concerns from yet another report of declining new home sales and helped boost the value of the dollar against the major currencies. Over time, the price of gold tends to move in the opposite direction to the value of the U.S dollar.

The streetTracks Gold SharesGLD was slipping 1.3%. Holdings of bullion by the fund dropped 11 tons Wednesday, bringing the total inventory down to 612 tons, continuing a slide that started in March.

"I think in the short term there is a little bit more downside price risk," says James Moore, gold analyst at TheBullionDesk.com in London. "Possibly we could see a retest of lows around $872."

Demand related to a forthcoming festival in India should, however, provide some price support in the form of physical demand, he explains.

In the mining patch, shares of Newmont MiningNEM were falling 1.6% in recent activity despite first-quarter earnings that were much better than expected.

Goldcorp GG, Barrick Gold ABX and Kinross Gold KGC each sank 4.1% or more.