Gold eases ahead of ECB meeting
London (Dec 4) Gold retreated on Thursday ahead of a European Central Bank (ECB) meeting that could lead to further monetary stimulus, after the dollar’s rise to two-year highs versus the euro prompted investors to cash in some of the previous day’s gains.
The metal held onto the $1,200 an ounce level, however, as consumers in Asia continued to buy and on uncertainty ahead of the ECB meeting and the release of US payrolls data on Friday.
Spot gold was down 0.6% at $1,201.40/oz at 11.04am GMT, while US gold futures for December delivery were down $7/oz at $1,201.70.
The euro fell to less than $1.23 for the first time in more than two years on Thursday, finding few friends in a market that is wagering the ECB will be forced to inject even more stimulus into a moribund eurozone economy.
It later steadied, but remained depressed, keeping up pressure on gold.
"Generally European easing has played out on gold via a stronger dollar (and) weaker gold prices," Citi analyst David Wilson said.
"(Though) it seems to me that there is a decent physical floor which is going to prevent gold from dipping too low."
Demand from Asian consumers has been firm this week. India, the world’s second-biggest consumer of the metal, last week scrapped a rule mandating traders to export 20% of all gold imported into the country.
After the ECB announcement on Thursday, Friday’s US payrolls data will help investors gauge the strength of the US economic recovery and how it will affect interest rates.
"We expect gold to be supported should the US payroll number disappoint and weaken if it exceeds expectations," HSBC said in a note.
A run of upbeat US data has supported the view that the US Federal Reserve will tighten monetary policy before other central banks.
A rise in US interest rates would lift the opportunity cost of holding non-yielding gold and further boost the dollar. That would make dollar-denominated gold more expensive for holders of other currencies.
Silver was up 0.2% at $16.43/oz.
Platinum was up 1.2% at $1,233/oz, while palladium was up 0.2% at $794.75/oz.