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Gold returns to $1,085 as US Dollar declines against euro, Randgold Resources and Petropavlovsk fall

Gold prices improved after slipping below $1,080 after the US Dollar continued its rally, getting support from Friday’s updates on the Q4 US GDP, which rose 5.7% to beat market expectations, and the Chicago PMI (Purchasing Managers Index), which increased to 61.5 from 58.7 in December, signalling higher industrial activity in the Midwest. The greenback eased 0.4% against the euro today, cooling off after the surge and propping up gold, which is seen as an alternative investment to the American currency. The yellow metal’s appeal as an inflation hedge increased last week after the Federal Reserve decided to leave the interest rates at near zero.

Gold improved to US$1,085/oz, while other precious metals followed with silver and platinum climbing to US$16.37/oz and US$1,520/oz respectively.

The yellow metal has been in selling mode so far this year as holdings in the largest gold back exchange fund SPDR fell 1.9% to 1,111 tonnes during the previous month compared to growth of 8.1% in January 2009.

Miners were mixed with silver and platinum focused stocks making gains, while gold producers retreated.

In the FTSE 100, gold miner Randgold Resources (LSE: RRS) shed less than 1%, while silver and gold miner Fresnillo (LSE: FRES) added 1% and platinum producer Lonmin (LSE: LMI) posted a small gain.

Specialty chemicals firm Johnson Matthey (LSE: JMAT) was flat.

Midcaps fell into the same pattern with gold producer Petropavlovsk (LSE: POG) posting a marginal loss, while Aquarius Platinum (LSE: AQP) and silver producer Hochschild Mining (LSE: HOC) gained less than 1%.

Junior miners mostly declined.

Diamond miner with assets in Sierra Leone and Guinea West African Diamonds (AIM: WAD) led the retreat with a 12% loss, while Africa operating gold miner GMA Resources (AIM: GMA) and Africa focused gold deposit developer Cluff Gold (AIM: CLF) followed, sliding 8% and 7% respectively. Western Australia operating Norseman Gold (AIM: NGL) was down 5% and Tajikistan operating gold miner Kryso Resources (AIM: KYS), Philippines focused gold producer Medusa Mining (AIM&ASX: MML) and Philippines focused Metals Exploration (AIM: MTL) all lost 4%.

Zambia focused emerald miner Gemfields (AIM: GEM) went against the tide with a 5% advance, while Australian gold and copper prospector Solomon Gold (AIM: SOLG) added 3.5%.

Disclosure: The author holds no positions in the company