By Nick Godt, MarketWatch
NEW YORK (MarketWatch) -- Gold retreated on Thursday from a record high reached earlier this week, after China said it didn't consider the metal suitable for asset allocation and the battered euro received a lift as a result of comments by European Central Bank President Jean-Claude Trichet.
Investors also were in more of a mood to embrace risk, after government data showed first-time U.S. jobless claims fell by 3,000 to 456,000 in the latest week.
The dollar gave ground in foreign-exchange trading as the euro made gains. See Currencies for more.
Gold for August delivery fell $9.70 to $1,220.20 an ounce on the Comex division of the New York Mercantile Exchange.
The contract on Wednesday ended at $1,229.90 an ounce, off 1.3% from the prior day's finish of $1,245.60 an ounce -- the highest price since gold futures started trading in the 1970s.
China's State Administration of Foreign Exchange, the regulator that oversees the nation's nearly $2.5 trillion foreign-exchange stockpile, said that the gold market isn't sufficiently large and is too illiquid and volatile to be considered suitable for asset allocation, according to a Reuters report.
The ECB's Trichet, meanwhile, said the bank will keep its bond-buying efforts to boost liquidity.
Separately, J.P. Morgan Chase & Co. raised its long-term price forecast for gold. "It's difficult to buy gold after its strength and close to record highs. However, we feel it's more difficult not to have a gold position in these highly uncertain times," the bank told clients in a research note.
