Gold fell one per cent overnight to touch a one-week low as robust US economic data outweighed the European Central Bank’s decision to hew to an accommodative monetary policy, with investors focusing on next week’s Federal Reserve meeting.
Spot gold was down 0.8 per cent at $US1,414.60 per ounce, having earlier touched $US1,410.77 – its lowest since July 17.
US gold futures settled down 0.6 per cent at $US1,414.70.
Earlier, prices rose as much as 0.5 per cent after the ECB left benchmark rates unchanged, with the bank’s chief sounding the need for a “significant degree of monetary stimulus” down the road.
“Gold sold off on good news out of the US with the fact that we are going into the Fed meeting next week,” said Bob Haberkorn, senior market strategist at RJO Futures.
Weekly US jobless claims fell to a three-month low last week, pointing to strength in the labour market, while new orders for key US-made capital goods surged 1.9 per cent in June.
“However, these two numbers will pass by as the day goes on and traders will be back to being focused on the Fed next week. People want to be long heading into the meeting,” Haberkorn said.
Market participants are now looking ahead to the US central bank’s July 30-31 monetary policy meeting where it is expected to trim its interest rate by at least 25 basis points.
“The current global economic headwinds and a dovish tilt by central banks globally is one of the most bullish environments for gold,” analysts from Bank of America Merrill Lynch said in a note.
“If the US central bank disappoints on rate cuts, gold could decline quickly, with volatility potentially exacerbated by elevated long positions.”
Among other precious metals, spot palladium edged down 0.6 per cent to $US1,531.07 per ounce, while platinum slid 0.9 per cent to $US868.04 after touching its highest in nearly three months earlier in the session.
Gains in platinum were due to bargain hunting as it is cheaper than gold by about $US550, with traders taking the opportunity to narrow the wide spread between the two, RJO’s Haberkorn added.
Silver slid 1.2 per cent to $US16.39 per ounce.
It has gained about 16 per cent since a near six-month low of $US14.25 hit in late May.
“The key element that has been fuelling the recent rally in silver was the stretched levels of the gold-silver ratio which suggested to many traders that silver was cheap relative to gold,” Julius Baer analyst Carsten Menke said, adding that profit-taking was now occurring.