Gold slips as ECB's Draghi lifts the US dollar

[NEW YORK] Gold prices fell on Thursday as the US dollar bounced from a near three-week low against the euro after European Central Bank President Mario Draghi signaled that any policy normalization in the euro zone would be very gradual.

The euro forfeited early gains against the dollar to decline after Mr Draghi said monetary policy would remain "reactive" and measures of underlying inflation were still subdued.

Spot gold was down 0.4 per cent at US$1,320.67 per ounce by 1.34pm EST (1834 GMT). It touched a one-week high of US$1,340.42 on Wednesday before closing 0.6 per cent lower. US gold futures for April delivery settled down US$5.90, or 0.4 per cent, at US$1,321.70 per ounce.

"The stronger dollar is definitely a headwind for gold,"said Walter Pehowich, executive vice-president of investment services at Dillon Gage Metals. "Once it broke above the 90 level (vs the dollar index ), gold came under significant pressure."

European and US stocks rose as traders took a break from worrying about a potential global trade war and focused on the ECB's plans to end its 2.5 trillion euro stimulus programme.

"Investors are watching to see if there are any hints that the ECB is winding down their quantitative easing," said Chris Gaffney, president of world markets at EverBank. "If they do that, you would see that strengthen the euro a bit." Markets are also awaiting further news on plans for US tariffs on some imported goods.

Mr Draghi leveled pointed criticism of US President Donald Trump's plans for more trade tariffs. "If you put tariffs against (those) who are your allies, one wonders who the enemies are," he said.

"Should tariff concerns remain in focus, gold should once again find its feet," ANZ said in a note.

Traders are also awaiting Friday's non-farm payrolls data for February, a key barometer of the US economy, for further clues on the pace of Federal Reserve rate increases.

Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar in which it is priced.

Silver lost 0.1 per cent at US$16.48 an ounce, while platinum dropped 0.7 per cent to US$945.74 after touching its weakest since Jan 4 at $941.

Palladium was up 0.4 per cent at US$972.50 per ounce after dropping to its lowest since Feb 9 at US$961.55 on Wednesday.

REUTERS