Gold edges off four-year low as dollar eases

Gold edged higher on Thursday as a retreat in the dollar took some pressure off the precious metal after its slump to four-year lows, but prices remained rangebound ahead of a European Central Bank meeting later in the day.

A surge in the dollar, in which gold is priced, knocked the metal in recent days through key chart support at $1,180 an ounce - the lowest level hit during last year's 28 percent plunge - and $1,155 to its lowest since early 2010 at $1,137.40.

Technical analysts have said that a test of the $1,000 level could be on the cards after a break of support at $1,155, a key retracement level of its rally to record highs in 2011.

Silver prices were also battered, tumbling more than 4 percent on Wednesday, their biggest one-day retreat in more than a year, at one point hitting a 4-1/2 year low of $15.13.

Spot gold was up 0.3 percent at $1,143.72 an ounce at 1018 GMT, while U.S. gold futures for December delivery were down $2.20 an ounce at $1,143.50. Silver was down 0.5 percent at $15.26 an ounce.

"We have the ECB today, and tomorrow the payrolls data in the United States, so this stabilisation is to be expected after the big move we've seen," ABN Amro analyst Georgette Boele said.

"However, we think this is just a pause and we will see more losses ahead, mainly because of the dollar but also because of expectations that interest rates will start to move up."

Gold tends to benefit from the kind of ultra-low interest rates in place since the start of the 2008 financial crisis because they cut the opportunity cost of holding the non-yielding asset.

The dollar steadied on Thursday after hitting a seven-year high versus the yen, knocking the dollar index down 0.2 percent, as traders sold into a steep rally ahead of the ECB meeting and U.S. non-farm payrolls data on Friday.

European shares fell 0.5 percent as worries that the ECB meeting might not bring new monetary easing measures.

 

SOFT GROWTH IN EURO ZONE

The ECB's November policy meeting takes place against a backdrop of soft growth prospects for the euro zone and mounting discomfort among Governing Council members over ECB President Mario Draghi's leadership style.

Little to no action is expected on further stimulus, with the bank set to stick to the policy path laid out over the summer, waiting for its stimulus to unfold before considering further steps.

Traders are also awaiting the U.S. non-farm payrolls report on Friday, which they think could turn out to be another key trigger for gold. A strong report could boost the dollar and dull bullion's safe-haven appeal even further.

Other than the dollar strength, analysts were concerned about the lack of robust demand in China, the top consumer of the metal, which typically buys a lot of jewellery, bars and coins whenever prices fall.

"Chinese gold buyers, who in the past often took advantage of falling prices as a cheap way of buying into the yellow precious metal, are still biding their time," Commerzbank said.

Prices on the Shanghai Gold Exchange were trading at a discount or on par with the global benchmark on Thursday. They have been at a discount for most of this week, hinting at sluggish demand.

Among other precious metals, spot platinum was up 0.1 percent at $1,207 an ounce, while spot palladium gained 0.3 percent to $756.50 an ounce.

 

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by David Goodman)