Gold falls from US$1,300/oz on reports of ECB, profit-taking

[NEW YORK] Gold pared gains on Wednesday, after climbing above US$1,300 an ounce for the first time since August, as profit-taking entered the market following reports of a proposed bond-buying programme for the European Central Bank (ECB).

The ECB's executive board has proposed a programme that would enable the bank to buy 50 billion euros (S$77.3 billion) in bonds per month starting in March, a eurozone source said.

Financial markets have been nervous about the ECB policy meeting on Thursday, when the bank is widely expected to unveil a quantitative easing (QE) programme.

Spot gold hit its highest level since Aug 15 at US$1,305 an ounce in early trade and was up 0.1 per cent at US$1,294.61 at 1941 GMT.

US gold futures for delivery in February settled down 0.04 per cent at US$1,293.70 an ounce. "Tomorrow is the second biggest soiree of the season, outside of a Fed hike meeting, and the gold market has decided to take some profit after a good long look up Draghi's dress and apparently unimpressed by the trillion euro knickers," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.

Mario Draghi is the ECB president.

The dollar slipped to a nearly one-week low against the euro following the reports on the ECB. A softer greenback makes dollar-denominated gold cheaper for holders of other currencies.

Gold rose above US$1,300 an ounce earlier on increased investor interest due to a softer dollar, as well as worries about the global economy and prospects of ECB stimulus measures.

Traders said holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, had jumped 1.55 per cent to the highest since Oct 29 at 742.24 tonnes. "We have seen this month the largest SPDR inflows since August 2012 when the Fed was revving up to do QE3, so ECB QE is having a similar impact," Macquarie analyst Matthew Turner said.

Worries over the health of the global economy have added to gold's appeal. On Tuesday, the International Monetary Fund cut its forecast for global growth in 2015.

Among other precious metals, spot silver jumped 1.6 per cent to its highest since Sept 19 at US$18.48 an ounce and later pared gains and was up 1.5 per cent at US$18.20. Palladium turned down 0.8 per cent to US$765.50 an ounce, while platinum was down 0.4 per cent at US$1,269.50 an ounce.

REUTERS