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Gold rises, can't shake shadow of biggest loss in 30 years

Gold settled higher on Thursday, but was still set for its biggest annual loss in three decades as investors switch to rallying equities on optimism about a global economic recovery.

Signs that the U.S. labor market is improving—data on Thursday showed weekly jobless claims decreased 42,000 to a seasonally adjusted 338,000 last week—propelled the price of more industrial precious metals higher, with spot platinum heading for its biggest daily gain since Oct. 17, up two percent.

Gold is headed for a near 30 percent slump in 2013—ending a 12-year rally prompted by rock bottom interest rates and measures taken by global central banks to prop up the economy.

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Spot gold rose as much as 0.9 percent to a one-week high of $1,215.70 an ounce earlier and was last trading up 0.6 percent to $1,212 an ounce.

U.S. gold futures for February delivery settled $9.00 higher at $1,212.30 an ounce.

(Read more: Contrarian view: Why gold will recover in 2014)

"Gold (is) looking better ... as shortcovering and year-end buying back of hedges and previously sold contracts ensues with few around to offer with limited audience,'' RBC Wealth Management said in an emailed comment.

Bullion fell to a six-month low of $1,185.10 last week after the Fed said it would begin tapering its $85 billion in monthly bond purchases next month, before recovering slightly.

The decline this year is set to be gold's biggest loss since 1981, while the current price is 37 percent below an all-time high of $1,920.30 hit in 2011.

And traders betting the metal's price would endure further losses were this week forced to cover their short positions, analysts said.

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—By Reuters