Gold Inches Higher on Weak Dollar In Thin Trade

New York (Dec 26)   Gold futures rose on Thursday, gaining strength from a weaker dollar in quiet trading.

The most actively traded contract, for February delivery, was recently up $10, or 0.8%, at $1,213.30 a troy ounce on the Comex division of the New York Mercantile Exchange.

The ICE Dollar Index, which measures the dollar against a basket of foreign currencies, was recently at 80.528, down from 80.608 earlier. A cheaper greenback makes dollar-denominated gold prices less expensive for investors using other currencies.

Low trading volumes also contributed to gold's march higher, as individual transactions have a greater impact on prices when trading is thin. With many investors in Europe on the sidelines for the Boxing Day holiday—and many U.S. traders taking time off between Christmas and the New Year—gold's daily trading volumes fell 70% from Dec. 20 to Dec. 24.

Gold's pre-Christmas gains also sparked some last-minute buying as investors holding bets on lower prices, known as short positions, rushed to close them out before year's end, said Sterling Smith, a futures specialist with Citi Institutional Clients Group.

"When the market rose above $1,200, that probably gave them a bit more impetus to cover," Mr. Smith said.