Updated from 12:25 p.m. EST

Gold hit a multimonth high as news of continued softness in housing kept the dollar weak Thursday, but the upward momentum couldn't be sustained and the rally quickly fizzled.

April-dated bullion contracts dipped 10 cents to close at $654.40 an ounce on the Comex division of the New York Mercantile Exchange. Earlier in the session prices reached an intraday peak of $661 before retracing.

The exchange-traded funds that hold the metal also fell. The streetTracks Gold Shares ( GLD) was off 0.4%, and the iShares Comex Gold Trust ( IAU) was lower by 0.5%.

Spot prices in London traded at $651.75 earlier in the day, the strongest level since early August and up from $642.10 Wednesday.

Helping spur the initial gold buying was a report from the National Association of Realtors that December sales of existing dwellings fell to an annual rate of 6.22 million, down from a revised prior-month figure of 6.27 million. Expectations were for a modest increase to 6.3 million.

" The blood-letting in housing continues, although at a lessening pace," says T.J. Marta, a fixed income strategist at RBC Capital Markets in New York.

Other economic news showed higher-than expected new claims for unemployment insurance last week, likely due to seasonal factors working through the system. Warm weather was said to have kept prior claims data lower than they otherwise would have been.

The data contributed to downward pressure on the greenback, which was recently buying 120.96 yen, down from 121.11 yen late Wednesday. One euro would buy $1.2977, vs. $1.296 previously. The price of gold tends to move in the opposite direction to that of the U.S. currency.

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