Futures & Commodities

Gold rebounds from 2010 lows after ECB rate decision

Sergio Alexander
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Gold bounced from near six-year lows on Thursday in line with a rebound in the euro, after the European Central Bank announced the minimum cut in its deposit rate that investors had been expecting.

The ECB cut its deposit facility to -0.30 percent from -0.20 percent, but left its main refinancing rate, which determines the cost of borrowing for banks at the ECB's weekly auction, unchanged at 0.05.

The cut was smaller than some traders had expected, leading to a nearly 3 percent rebound in the euro.

was up 0.8 percent at $1,061.76 an ounce, while U.S. gold futures for February delivery settled up $7.40 an ounce at $1,061.20.

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Gold earlier hit its lowest since February 2010 at $1,045.85 an ounce, after Federal Reserve chair Janet Yellen on Wednesday shored up expectations for a U.S. rate hike this month, before recovering after the ECB announcement.

"Today is the ECB day rather than Fed," Afshin Nabavi, head of trading at MKS, said. "Every article I read and everyone I spoke to (ahead of the announcement) was thinking of a rate cut. When they left (the main refinancing) rate unchanged, the market was rather shocked."

"The market in gold obviously was extremely short and we hit some stops."

Strength in the euro helped pull the dollar from a 12 1/2-year high hit on Wednesday when Federal Reserve chair Janet Yellen hinted at a U.S. rate hike later this month, saying she was "looking forward" to the rise.

A hike at the Dec. 15-16 policy meeting would be the first in nearly a decade. Rising rates tend to weigh on gold, as they lift the opportunity cost of holding non-interest paying assets.

U.S. nonfarm payrolls data on Friday will be keenly watched for more clues on the direction of U.S. policy.

"(If) the labour market report tomorrow isn't as strong as expected, (we could see) some short covering in gold futures," Julius Baer analyst Carsten Menke said. "However, that does not change the longer term picture at all, that we are just in an environment where gold is not attractive."

The world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares fell 2.41 percent to 639.02 tonnes on Wednesday, the lowest since September 2008. The outflow is the biggest single-day percentage drop in four years.

Silver was up 0.5 percent to $14.07, after hitting its lowest since August 2009 at $13.79 an ounce. Platinum was up 1.3 percent at $842 an ounce, after touching a seven-year low of $819.75, while palladium was up 0.9 percent at $531.55 an ounce.