Gold drifts as investors await ECB, UK poll, Comey testimony

By Eric Onstad

LONDON (Reuters) - Gold drifted on Thursday as investors stayed on the sidelines waiting for the outcome of the European Central Bank meeting, Britain's national election and testimony from the former U.S. FBI director James Comey.

Those and other uncertainties are providing good support to gold, which is likely to eventually resume its rally even if it extends its correction lower in the short term, said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

"We are well and truly stuck in a wait-and-see mode. That's following a buying spree over the past week, so it's quite natural that we see markets taper off some of the recent gains," he said.

 

"The sentiment on the market at the moment is that gold is a buy on dips. The question is whether we'll see a dip of any size once there's more clarity following today's events."

Spot gold was down 0.2 percent at $1,283.76 per ounce at 1020 GMT.

U.S. gold futures for August delivery dipped 0.5 percent to $1,286.80 an ounce.

The ECB is likely to keep the money taps fully open at its meeting later on Thursday while Britons began voting in an election called by Prime Minister Theresa May to strengthen her hand in looming Brexit talks.

In Washington, testimony to Congress by former FBI head Comey will turn the spotlight on a clash between him and President Donald Trump. Gold fell from a near seven-month high on Wednesday after Comey's written testimony contained few surprises.

"Unless there is a major surprise today... I doubt there will be much reaction to gold price from the UK election. The market has already priced this," Cameron Alexander, an analyst with Thomson Reuters-owned metals consultancy GFMS, said.

But going forward, a growing list of global uncertainties along with macro forces are expected to push gold higher so any dips would be an opportunity to build or add to positions, said UBS strategist Joni Teves.

"We think that investor allocations to gold remain small compared with other assets. An extension of gold's gains up ahead raises the risk that many would have to play catch-up," she said in a note.

In other precious metals, palladium climbed 1.9 percent to $849.50 an ounce. In the previous session, it hit the highest in nearly three years, but shed its early gains to end 2.3 percent lower.

Platinum dipped 0.1 percent to $940.80 per ounce, and silver rose 0.4 percent to $17.63.

(Additional reporting by Vijaykumar Vedala and Koustav Samanta in Bengaluru. Editing by Jane Merriman)