Gold drops three-week low as investors look to equities

[BENGALURU] Gold hit a three-week low on Thursday, after falling more than one per cent in the previous session, as investors looked to buy into rising equity markets rather than purchasing safe-haven assets.

Asian stocks climbed to nine-month highs on Thursday, helped by a pickup in capital inflows and a recovery in global oil prices, while the dollar stood strong on U.S. equity market gains.

Spot gold fell 0.1 per cent at US$1,314.20 an ounce by 0406 GMT. It touched a low of US$1,310.56 earlier in the session, its lowest since June 28. Bullion fell 1.2 per cent on Wednesday.

US gold was down 0.4 per cent at US$1,314.20 an ounce.

"Stock markets are moving up which is not good for gold. We expect prices to scale down a little more. I don't think prices will stabilize before next week's US Federal Reserve meeting," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Spot gold has found a support at US$1,313 per ounce, and may hover around this level temporarily before falling towards the next support at US$1,298, according to Reuters technical analyst Wang Tao.

"Thin summer trading conditions may be as important a reason for gold edging lower than renewed expectations for a rate rise this year," HSBC analyst James Steel said in a note.

"In quiet conditions the gold market may gravitate to the vicinity of large round numbers, with US$1,300/oz the closest and most obvious."

Meanwhile, the European Central Bank is all but certain to keep rates firmly on hold on Thursday, when announcing its rate decision due at 1145 GMT.

"With gold looking increasingly shaky on the charts, all eyes will turn to the ECB policy meeting. Should the central bank signal a more accommodative policy, we could see gold get a bit of a lift despite the fact that the dollar could strengthen as a result," said INTL FCStone analyst Edward Meir.

Spot silver was on track for its sixth straight session of losses, tying a streak in December 2015. It fell 0.7 per cent to US$19.26 an ounce.

Platinum, which hit a two-week low on Wednesday, was down 0.3 per cent to US$1,076.60.

Palladium, which hit its highest in nearly nine months on Wednesday, was down 0.5 per cent at US$666.35 per ounce.

REUTERS