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Gold slips from 5-month high as dollar, shares climb on ECB move

AP

Gold fell on Friday, pulling back from a five-month high, as the euro hit an 11-year low against the dollar and shares rose after the European Central Bank announced a multibillion euro bond-buying program to revive the sagging euro zone economy.

The metal, often seen as a hedge against inflation, jumped more than one percent above $1,300 an ounce on Thursday after the ECB pledged to spend more than 1 trillion euros to boost growth and ward off deflation.

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But prices have since pared some of those gains as the impact of a stronger dollar that makes dollar-denominated assets more expensive for foreign investors prevailed.

"Gold was completely dislocated from the dollar yesterday, meaning that euro-gold is the best performing commodity this year, helping dollar gold stay fairly stable around $1,300," Saxo Bank senior manager Ole Hansen said. "But that strength in the dollar is now proving too much."

Spot gold was down 1 percent at $1,289 an ounce. Bullion peaked at $1,306.20 on Thursday, its highest since Aug. 15, and was still headed for a third straight weekly gain.

U.S. gold futures were down $11 at $1,290 an ounce.

The dollar rose up to 0.9 percent against a basket of currencies, mostly due to euro weakness, while European shares had their biggest two-week rally in five years.

Euro-priced gold hit its highest since April 2013 at 1,153.13 euros an ounce.

Spot gold is up almost 10 percent since the beginning of the year as political uncertainties in the euro zone and worries about global economic growth lifted investment demand.

Traders were now likely to turn their attention to Sunday's election in Greece and next week's Federal Open Market Committee (FOMC) two-day policy meeting for clues about the wider macro economic environment and the timing of an interest rate hike in the United States.

The Fed is expected to repeat that global risks have yet to throw the U.S. recovery or their rate hike plans off track despite the swelling ranks of central banks cutting rates and ramping up stimulus.

Still, the global economic uncertainty as well as positive chart patterns should keep gold higher, with $1,320 and $1,350 both "achievable upside targets," said INTL FCStone analyst Edward Meir, who has a short-term bullish stance on gold.

Among other precious metals, spot silver was down 0.6 percent at $18.17 an ounce. Palladium lost 0.4 percent at $769.00 an ounce, while platinum fell 0.8 percent to $1,267.10 an ounce.