Gold eases as economic optimism weighs; geopolitics eyed

By Frank Tang and Clara Denina

NEW YORK/LONDON (Reuters) - Gold prices slipped on Thursday, pressured by steadily falling crude oil prices and an encouraging U.S. economic outlook, but geopolitical concerns provided some support, traders said.

Lingering worries that the U.S. Federal Reserve might raise interest rates sooner and more sharply than expected pressured gold after data showed U.S. jobless claims fell unexpectedly last week.

Earlier in the day, U.S. stocks fell sharply, with the S&P 500 index down about 1 percent as energy shares dropped. The S&P later rebounded and Brent crude oil pared losses.

Meanwhile, pro-democracy rallies in Hong Kong underpinned gold prices. Investors worried that unrest in the special administrative region could embolden dissidents in mainland China, threatening growth in the world's second-largest economy.

"With the likelihood of further weakness in equity markets, coupled with the still-volatile situation in Hong Kong, we would rather not want to be short gold here, as we think the precious metal may benefit from some short-covering heading into the weekend," said Edward Meir, metals analyst at brokerage INTL FCStone.

Spot gold was down 0.1 percent at $1,212.25 an ounce by 3:14 p.m. EDT (1914 GMT), less than $10 above a nine-month low of $1,204.40 reached on Tuesday.

U.S. COMEX gold futures for December delivery settled down 40 cents at $1,215.10.

The gold market was also supported by other factors, such as a dollar drop and an assault by Islamic State insurgents into a Syrian border town.

The dollar fell against the euro as European Central Bank President Mario Draghi gave no hints of an imminent sovereign bond-buying program in a news conference.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 1.2 tonnes to 768.66 tonnes on Wednesday, the lowest level since December 2008.

The next market focus will be the release of U.S. September non-farm payrolls data on Friday.

In other precious metals, silver was down 0.6 percent at $17.04 an ounce, trading just above its lowest level since March 2010.

Platinum fell 1 percent to $1,262.25 an ounce after falling to a five-year low in the previous session, and palladium dropped 1.1 percent to $765.75 an ounce.

Longer-term demand for platinum group metals, largely used as auto catalytic converters, should improve after U.S. auto sales rose sharply in Q3, its best quarter in eight years.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Pravin Char, Jane Baird, Lisa Von Ahn and Diane Craft)