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Gold Prices Heartbroken by Europe GDP Snub

NEW YORK ( TheStreet) -- Gold prices sank on Thursday, heartbroken by a surge in the U.S. dollar as the euro weakened on glum economic news from Europe.

Gold for April delivery shed $9.60 to settle at $1,635.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,650 and as low as $1,633.50 an ounce, while the spot price was losing $7.60, according to Kitco's gold index.

Eurostat, the statistical office of the European Union, said that the most recent gross domestic product flash showed 0.6% contraction in the fourth quarter of 2012 compared against the prior quarter.

"That basically hurt the euro today, which in return weighed on gold given the positive correlation," said Howard Wen, a precious metals analyst at HSBC Bank USA. "You also have a slight selloff in equities and all the other risky assets, so today was pretty much a dollar-strength, long-dollar day."

Silver prices for March delivery slipped 52 cents to close at $30.35, while the U.S. dollar index was popping 0.52% to $80.49.

The downbeat data catalyzed a dip in the euro to $1.334 against the greenback, which was a 0.83% drop from the prior day's close at $1.3453.

"It's not good news, but it's kind of what is expected. Didn't really expect Europe to be growing at this point, they have so many problems," said Randy Warren, chief investment officer of Warren Financial Service.

Major U.S. equity indices sharply sold off as the markets opened. They began to pare back losses in part due to a better-than-expected report from the Labor Department, which said initial jobless claims for the week ended Feb. 9 were 341,000, a drop of 27,000 from the prior week, and much lower than economists' expectations of 365,000 new claims.

"It's the continuous drip, drip, drip of good news, the markets keep on getting little bits of good news here and there, and what we're probably going to see is a little bit of a virtuous cycle," said Warren.

Though equities cheered the news, the weekly print of slight strengthening in the labor market didn't bolster confidence in the yellow metal's price.
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