Gold drops as Mideast unrest, soft U.S. data quash demand for risk

Gold prices fell in Asian trading on Thursday after Israeli airstrikes took out a senior Hamas military leader and quashed already ebbing demand for risk, which sent the dollar gaining as a safe-haven play.
Gold and the dollar trade inversely, and soft European and U.S. data also stoked demand for the safe-harbor greenback, which came at the yellow metal's expense.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery were down 0.28% at USD1,725.25 a troy ounce, up from a session low of USD1,722.85 and down from a high of USD1,726.05 a troy ounce.
Gold futures were likely to test support at USD1,717.85 a troy ounce, Tuesday's low, and resistance at USD1,733.85, Wednesday's high.
Israel launched a military offensive against Palestinian militants in Gaza earlier that killed a Hamas military leader, which sent oil prices higher on fears that fighting could aggravate tensions across the oil-rich Middle East and threaten supply.
Oil later pared back gains as markets refocused their attention on U.S. and European economies after a string of disappointing economic indicators hit the wire on both sides of the Atlantic, which sent the dollar gaining and gold and other commodities falling.
In the eurozone earlier, official data revealed that industrial production declined 2.5% in September, well beyond expectations for a more modest 1.9% decline.
The numbers sparked fears that the eurozone's preliminary gross domestic product rate for the third quarter will disappoint when released later Thursday.
France, Germany and Italy are also to release individual GDP reports.
Meanwhile in the U.S., lackluster sales data kept investors parked in the safe-haven dollar.
The U.S. Commerce Department reported earlier that retail sales fell by a seasonally adjusted 0.3% in October, weaker than expectations for a 0.2% decline.
Core retail sales, which exclude automobile sales, came in flat last month.
Analysts were expecting core retail sales to rise 0.2% in October, after rising by an upwardly revised 1.2% in September.
Retail sales serve as a good barometer for U.S. economic health.
Meanwhile, separate data revealed that U.S. producer price inflation fell unexpectedly in October, while core prices also dipped.
The Labor Department reported that producer prices fell by a seasonally adjusted 0.2% in October, compared to expectations for a 0.2% increase, after rising 1.1% in September.
The core producer price index declined 0.2% in October, defying expectations for a 0.1% increase, after coming in September.
Ongoing uncertainty surrounding the fiscal cliff in the U.S. swayed investors away from risk as well, which bolstered the dollar against the greenback.
Elsewhere on the Comex, silver for December delivery was down 0.79% and trading at USD32.620 a troy ounce, while copper for December delivery was up 0.30% and trading at USD3.458 a pound.