Gold gave back a portion of its recent rally on Thursday and moved back below the key $900 an ounce level. December gold closed at $886.50, down $20.00 on the session. Gold touched as low as $885.00 earlier in the day. The precious metal had added more $70 an ounce in the first three sessions of this week as traders turned to gold as a safety option amid the global credit crisis that led to a coordinated half-percentage point rate cut among several major central banks, including the Federal Reserve, European Central Bank and Bank of England. The financial crisis will take center stage at the Group of Seven meeting of officials from leading industrialized countries on Friday in Washington. The meeting of finance ministers and central bankers will focus on the possible approaches various countries can take to alleviate a growing global credit freeze and failing banks. The Treasury Department may nationalize some struggling banks in an effort to aid the struggling financial sector, according to the New York Times. Government officials reportedly said the recently-passed $700 billion bailout bill gives them the authority to inject cash into banks that request it. The dollar continued to gain on the sterling and remained steady with the euro on Thursday. The greenback hit a fresh 2 1/2 year high of 1.7149 against its UK rival and rebounded away from a six-day low against the euro. The buck also hit a 1 1/2-year best against the Canadian loonie. In U.S. economic news, a Department of Labor report showed that jobless claims fell to 478,000 from the previous week's revised figure of 498,000. Economists had been expecting jobless claims to fall to 475,000 from the 497,000 originally reported for the previous week. Later, a Department of Commerce report showed that wholesale inventories increased by 0.8 percent in August following an upwardly revised 1.5 percent increase in July. Economists had expected inventories to increase by 0.4 percent compared to the 1.4 percent increase originally reported for the previous month. Crude oil prices inched lower, further weighing on gold's hedge appeal. Oil fell as low as $86.12, testing Wednesday's 10-month low, as Energy Information Data continued to show demand is lower in the U.S. The natural gas inventory report showed stockpiles were up 88 billion cubic feet in the week ended Oct. 3. On Wednesday, the EIA said crude oil inventories increased by 8.1 million barrels from the previous week and gasoline inventories increased by 7.2 million barrels last week.

Source