SAN FRANCISCO (MarketWatch) — Gold futures settled Thursday at their highest level of the week, finding support from disappointing U.S. economic data, including a fall in a regional manufacturing index, as the recent selloff — and lower prices — lured buyers.

Copper, meanwhile, bounced off the 18-month low it saw a day earlier.

Gold for June delivery GCM23, rose $9.80, or 0.7%, to settle at $1,392.50 an ounce on the Comex division of the New York Mercantile Exchange.

Gold's rout no surprise to some

Prices settled at their highest level since Friday, the day of the recent steep, two-day selloff in the metal, though prices are still no where near the more than $1,500 level they finished at last week.

“The futures-market led attack on the gold price backfired to some extent, as the widespread buying of physical gold induced by this price anomaly will now start to drive the price upward,” said James West, portfolio adviser to the Midas Letter Opportunity Fund.

Gold prices finished Wednesday down 0.3%. That was their third loss in four sessions, but the recent price decline lured in some bargain hunters, according to analysts.

“We are hearing of huge jumps in premiums for all gold products at the street level, so there is a sense that the downdraft for gold futures has overrun the rear physical metal market in a big way,” said Gene Arensberg, editor of the Got Gold Report.

“High premiums mean supply is drying up and it is just a question of time before that shows up in the paper gold markets,” he said.

Demand for physical gold is indeed on the rise, according Mark O’Byrne, executive director at investment and bullion specialist GoldCore. In terms of volume, gold buyers outnumbered sellers by a ratio of nearly 9 to 1 on Thursday at GoldCore.

And Richard Hastings, macro strategist at Global Hunter Securities, said the focus for the market should turn to China and India jewelry demand signals. Jewelry consumption trends seem to deteriorate north of $1,400 “so this might be an intermediate-term battleground for gold, to ride Asian jewelry demand,” he said.

Economic figures Thursday were also supportive for gold.

The Philly Fed numbers and the jobless claims shines a light on our economy, which is still “slowing down considerably,” said Scott Carter, chief executive offer of Los Angeles-based Lear Capital.

This will most likely lead to a downward revision to first-quarter economic growth, and the Federal Reserve will be forced to continue with low interest rates and increased quantitative easing, he said. “This will be bullish for gold over the long term as paper currencies lose value.”

On Thursday, the Philadelphia Federal Reserve on Thursday reported an unexpected fall in its business-conditions index, the Labor Department showed a rise in weekly initial jobless claims that was a bit more than expected and the Conference Board reported a downtick in its leading economic index and said the U.S. economy has ”lost some steam.”

More losses on tap?

Still, part of the reason for the recent declines in gold prices is the rally in the U.S. dollar — and Crédit Agricole on Thursday said it expects more downside for gold in the medium term due to firming in the dollar.

Strength in the greenback tends to pressure prices for gold, as it makes the metal more expensive for foreign investors to buy.

At the start of the year, Crédit Agricole said it was “among the most bearish forecasters for gold but even our forecast for $1,650 looks tough to achieve now,” wrote global head of strategy Mitul Kotecha to clients.

Its new 2013 average forecast for gold is $1,480 an ounce and its end-year 2013 forecast is $1,350 an ounce.

Concerns about selling of gold reserves by central banks in Europe, outflows from gold exchange-traded products, cuts in price forecasts, and capitulation selling have all been cited by analysts as reasons investors have yanked gold prices sharply lower. Goldman Sachs had cut its forecast before the big gold selloff. Futures prices lost nearly 13% in April so far.

Crédit Agricole’s Kotecha said its quantitative model on gold prices using oil prices, 2-year U.S. Treasury yields US:2_YEAR and the U.S. dollar index DXY, -0.06% “as explanatory variables highlights that the current selloff is overdone.” The model also projects a decline in gold prices over the coming months, however.

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In a note Thursday, Michael Lewis, strategist at Deutsche Bank, said gold would likely post negative annual returns this year for the first time since 2000 as the market witnesses a “structural change.”

Meanwhile, May copper futures HGK23, on Thursday tacked on almost 2 cents, or 0.5%, to end at $3.205 a pound, rebounding from a low of $3.16. Prices finished Wednesday at their lowest since October 2011.

The industrial metal on Wednesday sank 3.6%, with a ramp-up in demand concerns after China, a major commodities consumer, posted weaker-than-expected growth for the first quarter.

Despite gold’s gains, May silver US:SIK3 finished lower, down 6 cents, or 0.3%, to $23.245 an ounce, after Wednesday’s loss of 1.4%.

“The price of gold and silver might not move in lock-step,” said Lear’s Carter, as silver, given its industrial component, sees prices fall as the outlook for the economy turns negative.

July platinum futures US:PLN3 fell $6.40, or 0.5%, to $1,429 an ounce. Palladium for June delivery US:PAM3 rose $8.40, or 1.3%, to $669.80 an ounce.