The price of gold fell after the Labor Department figures reflected the decline in applications for unemployment benefits to a 7-week low for the week of December 20.

The number of Americans who first applied for unemployment benefits fell last week, signaling a further improvement in labor market conditions in the final stretch of the year.

Initial claims for unemployment insurance, the sensor layoffs, reduced by 9000 and reached a seasonally adjusted 280,000 in the week ended December 20 as The Labor Department said on Wednesday. Economists had expected 291,000 new claims.

Moving average for the four weeks of initial claims, which smooths out weekly volatility, fell by 8500 - up to 290,250.

The report also showed that the number of people continuing to receive unemployment benefits rose by 25,000 (up to 2 400 000) for the week ended December 13th. These data are presented with a week delay.

Initial claims fell sharply this year, as companies seek to retain employees and hire new addition.

On the eve gold futures fell due to evidence of a larger-than-expected US GDP growth in the third quarter. Strengthening of the US dollar against a basket of major currencies also affected the precious metal. The dollar index jumped to a new 4-year high on Tuesday.

However, the decline in gold prices has been somewhat limited because of the report, which reported an unexpected drop in orders for durable goods in the US in November, as well as by data demonstrating an unexpected drop in new home sales.

The cost of the February gold futures on the COMEX today fell to 1172.70 dollars per ounce.