Gold was steady in Europe on Thursday as traders awaited the European Central Bank’s interest rate announcement later in the day, which could put pressure on the euro and consequently on gold.
Spot gold rose to $810.70/812.70 an ounce at 1015 GMT from $810.55 in New York late on Wednesday. The ECB is widely expected to cut rates for the fourth month in a row by between 25 and 50 basis points as dismal economic data raises the prospect of a prolonged recession. The decision should have a significant effect on the foreign exchange markets, and consequently on gold.
“A lot is still influenced by euro/dollar,” Wolfgang Wrzesniok-Rossbach, head of sales at precious metals group Heraeus, said. The dollar was firmer versus the euro in early trade, with the single currency eroded by a spate of poor economic news.
“All eyes will be on the ECB's interest rate decision,” Standard Bank analyst Walter de Wet said. “Standard Bank expects a 50 bps cut. This, combined with increased risk aversion since the start of the week...should continue to support the dollar.” A firmer dollar usually pressures gold, which is often bought as an alternative investment to the US currency.
Lower oil prices are also weighing on gold. Bullion typically moves in the opposite direction to crude, as it is often bought as an inflation hedge, and the direction of the oil market is an indicator of interest in commodities. Oil fell more than 2% or $1 a barrel after bleak figures from world markets pointed to weak demand. (Reuters)