By Stephanie Yang and Katherine Dunn

Gold prices closed lower on Thursday, weighed down by positive economic data and a lack of volatility in markets.

Gold for February delivery settled down 0.2% at $1,130.70 a troy ounce on the Comex division of the New York Mercantile Exchange, after trading as high as $1,135.50 earlier in the session.

Data from the Commerce Department on Thursday showed third-quarter gross domestic product expanded at the strongest quarterly pace of growth in two years. Durable goods orders declined at a less-than-expected 4.6% compared with a month earlier, and jobless claims rose to the highest level in six months.

Gold prices tend to benefit from market uncertainty or a pessimistic economic outlook, as investors seek safe-haven assets. However, fear in the market has been largely absent. On Wednesday, the CBOE Volatility Index, a measure of fear in the stock market, fell to its lowest intraday level since August 2015.

"Low volatility may be contributing to gold's weakness," said James Steel, chief precious metals analyst at HSBC, in a Thursday note. "Should [volatility] rise from these low levels, gold may get a boost higher."

Otherwise, trading is slowing ahead of the Christmas holidays, said David Govett, head of precious metals at London brokerage Marex Spectron.

"I wouldn't expect anything to happen between here and New Year's," he said.

Looking forward, some traders are hoping for gold to see some strength in January, which is often a bullish month for gold as traders re-enter the market and reposition, Mr. Govett said. That would offer some relief for the bulls after a rough quarter, during which gold has fallen more than 15% over the last three months.

"The gold bulls are grasping for any straws they can," he said.

Medium term, those hopes may be reinforced, if gold can benefit from inflation hedges in the new year, on the back of inflationary policies touted by President-elect Donald Trump, and geopolitical tensions rattle investors, said Capital Economics in London.

However, gold is facing an overwhelming headwind in expectations that the U.S. Federal Reserve will continue to raise interest rates next year, which would dampen the metal's appeal as an investment compared with yield-bearing assets.

Write to Stephanie Yang at stephanie.yang@wsj.com and Katherine Dunn at Katherine.Dunn@wsj.com

(END) Dow Jones Newswires

December 22, 2016 14:43 ET (19:43 GMT)

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