Gold price continues sliping as dollar rises after ECB decision
New York (Dec 8) Gold retreated into the red on Thursday after the dollar rebounded on the back of a decision by the European Central Bank to extend monthly asset purchases until next December albeit at a lower monthly level.
Gold turned lower as the market focused on the central bank's move to extend its quantitative easing program until the end of 2017, beyond the six-month extension expected. The dollar index rallied 1 percent, making dollar-denominated gold more expensive for holders of other currencies. Spot gold was down 0.3 percent at $1,170.40 an ounce by 2:31 p.m. EST (1931 GMT), and U.S. gold futures settled down 0.4 percent at $1,172.40 per ounce.
"If the ECB has the ability to trigger euro-dollar weakness again, and it breaks under the key 104.58-105 level, then you'll get the next phase of a dollar rally, which will be painful for gold," said Georgette Boele, ABN AMRO commodity strategist in Amsterdam.
The euro gave up all its gains versus the dollar after the ECB move, falling around 1.4 percent.
Also weighing on gold were increased expectations the U.S. Federal Reserve will increase interest rates at its policy meeting next week, as higher U.S. rates raise the opportunity cost of holding non-yielding bullion.
Interest rates futures implied traders saw a 97 percent chance the Fed would raise rates at its policy meeting (FOMC) next Tuesday and Wednesday, CME Group's FedWatch program showed.
"As we head into the FOMC, it is certain that the Fed will raise rates this time. I believe this is mostly priced into gold. We might still see some reaction and the recent low of $1,157 may be revisited again," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.
Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund (ETF), dropped 0.72 percent to 863.67 tonnes on Wednesday from a day earlier. Holdings have fallen more than 8 percent since November. "The mounting bleed of gold ETF outflows highlights the weakness that has proliferated for gold since the U.S. elections," said RBC Capital Markets in a note.
"Going forward, we think ETF holdings should stabilize with prices."
Silver fell 0.8 percent at $16.96 an ounce after rising more than 2 percent in the previous session.
Platinum rose 0.2 percent at $938.25, while palladium rose 0.7 percent at $737.75 after touching a low of $713.97, the weakest since Nov. 18.
Source: Reuters
