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Gold price recovers as ECB comments lift euro

Gold
Source: World Gold Council

Gold fell on Thursday as the European Central Bank's reaffirmation of its ultra-easy policy stance pushed the euro lower against the dollar, although moves were muted before a news conference by ECB chief Mario Draghi.

The ECB kept rates at record lows and confirmed its asset-buying programme would continue at 60 billion euros ($69.15 billion) per month at least until December and could be expanded or extended if deemed necessary.

The euro extended losses to slip 0.3 percent against the dollar after the policy decision, retreating further from a recent a 14-month high. A stronger dollar tends to pressure assets priced in the U.S. currency.

Spot gold was up 0.22 percent to $1,243.15 per ounce.

U.S. gold futures for August delivery settled at $1,245.50 per ounce.

"It is the dollar factor which is having an influence on the gold price," ThinkMarkets chief market analyst Naeem Aslam said. "Investors will react if there are any surprises from Draghi in his speech, (but) we do not expect any."

The maintenance of loose monetary policy in the euro zone could be seen as either positive or negative for gold, depending on whether the metal responds positively to a persistently low opportunity cost of holding the non-yielding metal or more negatively to a weaker euro.

The ultra-low interest rates in place since the last decade's global financial crisis have been a key factor supporting gold prices in recent years. With the end to that unprecedented stimulus now within sight, financial investors are nervously trying to gauge how big central banks around the globe will unwind unconventional policies that have kept borrowing costs ultra low.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 5.3 tonnes on Wednesday to 816.1 tonnes, their lowest since early February. Its reserves have declined more than 12 tonnes so far this week.

"In terms of investment demand, the physically backed products have seen outflows recently rather than inflows, so there hasn't been much support from that side," Julius Baer analyst Carsten Menke said.

Among other precious metals, silver was up 0.95 percent to $16.394 an ounce after touching its highest in over two weeks at $16.36 in the previous session.

Platinum was 0.57 percent higher at $923.24 an ounce, while palladium was down 1.06 percent at $846.90 an ounce. It hit a three-week high of $872.25 an ounce on Wednesday.