Gold falls with euro ahead of likely ECB easing

[MANILA] Gold edged lower on Wednesday, slipping with the euro as expectations that the European Central Bank is almost certain to ease policy this week weighed on the single currency.

Investors are also taking profits in the precious metal after its recent rapid rise, which saw it hit a 13-month high last week. But Mark To, head of research at Wing Fung Financial Group, said it may be a brief setback.

"Some correction is in place after the surge in gold prices in the past few weeks, but support could be strong at US$1,230," said Mr To. "I'm optimistic over the medium term because I don't think the Fed is going to raise interest rates very soon despite the recent good economic data," he said, citing policy easing moves by other central banks.

Investors expect the European Central Bank to cut its deposit rate by at least 10 basis points and expand its asset-buying programme at its meeting on Thursday.

Spot gold was down 0.5 per cent at US$1,254.26 an ounce by 0313 GMT. Gold touched US$1,279.60 last week, its strongest since Feb. 3, 2015.

Bullion could move towards US$1,300 "or even $1,400" by the second quarter, said Mr To, who only sees one US rate hike in 2016, possibly later in the year.

US gold for April delivery eased 0.6 per cent to US$1,255.40 an ounce.

Gold had been supported by fairly low expectations that the Fed will raise interest rates at its March 15-16 policy meeting. The Fed lifted rates for the first time in nearly a decade in December amid signs of strength in the US economy.

The strength is particularly evident in the US labour market after a robust, forecast-beating 242,000 increase in nonfarm payrolls in February. Gold has stood its ground despite Friday's jobs data as many traders rule out the possibility of a near-term hike in US interest rates.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped to 25.4 million ounces on Tuesday, but that was not far below 18-month highs reached last week.

Spot silver declined 0.5 per cent to US$15.235 an ounce, platinum lost 1 per cent to US$969.50 and palladium fell 1.2 per cent to US$549.45.

REUTERS