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Gold slips on dollar, oil; ECB cuts rates

A $1-a-barrel dip in oil prices is also pressuring the precious metal, analysts said.

Spot gold slid to $766.00/768.00 an ounce at 1334 GMT from $772.60 an ounce in New York late on Wednesday.

The ECB cut its benchmark rate by three-quarters of a point to 2.50 percent, its lowest level in nearly 2-1/2 years, as inflation plummeted and the euro zone economy sank deeper into recession.

This followed a full percentage point cut to 2 percent by the Bank of England.

Gold softened a touch on the news, but expectations of rate cuts prevented a larger reaction.

“The ECB cut by more than was originally expected, but overall a lot of it was already priced in,” BNP Paribas analyst Michael Widmer said. “Gold is still well within the ranges we saw earlier in the day.”

In the slightly longer term, rate cuts are likely to benefit gold if they increase liquidity, analysts said.

“The recent sharp dip in inflation pushed up real interest rates, exerting pressure on gold,” Commerzbank said in a note. ”Generous rate cuts are therefore good for gold as they again reduce the opportunity costs involved in holding it.”

The dollar remained firmer, though off highs, against the euro as investors worried about the breadth and depth of the global recession bought into the currencies.

A stronger dollar tends to weigh on gold, which is commonly bought as a hedge against weakness in the U.S. currency.

Traders are now turning their attention to U.S. non-farm payrolls data due on Friday for clues as to the next direction of the currency markets, and therefore of gold.

Oil prices, the other main external driver of gold, added pressure on the precious metal as they fell to a four-year low on Thursday.

Oil has been hit by concerns that a deep recession could have a severe impact on demand. These outweighed the price-positive effect of a 400,000-barrel drop in U.S. crude inventories reported on Wednesday.

Physical demand is easing in some of gold’s traditional markets as traders await price falls. Indian buyers are looking for prices of around $740 an ounce before making purchases, dealers reported.

Platinum steadies

Platinum prices were steady, but held only a touch over those of gold, as traders worried about the impact of the recession on carmakers, who account for around half of all demand for the white metal.

“Concerns over industrial demand for the metals - particularly from the auto sector - will continue to keep prices under pressure for the time being,” Standard Bank analyst Leon Westgate said in a note.

“In the background however, mounting production cutbacks and mine closures suggest that there may be a very rapid price recovery once the first signs of increased metals demand start to emerge,” he added.

Spot platinum was quoted at $796.50/816.50 an ounce, from $793.50 in New York trade late on Wednesday. Its sister metal palladium was at $169/177 an ounce against $171.

Zurich Cantonal Bank said holdings of its platinum-backed exchange-traded fund rose 27 percent to 105,200 ounces on Dec 1, from 83,000 ounces in September. Its palladium-backed ETF saw inflows of 12 percent in the same period.

Among other precious metals, spot silver slipped to $9.42/9.50 an ounce from $9.63.

The world’s largest silver-backed ETF, the iShares Silver Trust, said its silver holdings fell 32.24 tonnes to 6,651.79 tonnes on Dec 3.