* ECB expected to lay groundwork for shift away from stimulus
* SPDR Gold Trust holdings fall to lowest since early Feb
* GRAPHIC-2017 asset returns: http://tmsnrt.rs/2jvdmXl
(Updates throughout) LONDON, July 20 (Reuters) - Gold eased on Thursday as the dollar firmed ahead of a European Central Bank meeting which will be watched for signs of officials moving away from an ultra-loose monetary policy. The ECB is expected to lay the groundwork for an autumn policy shift when it meets, after ECB chief Mario Draghi opened the door to tweaks in a speech in Portugal last month.
The spot gold price was down 0.2 percent at $1,238.04 an ounce at 1048 GMT, while U.S. gold futures for August
delivery were 0.4 percent lower to $1,237.40 an ounce. The euro was down 0.1 percent against the dollar before the policy decision, but hovered close to a recent a 14-month high. A stronger dollar tends to pressure assets priced in the U.S. currency. "It has been currency swings and rate swings which have been driving gold as of late," Julius Baer analyst Carsten Menke said. "You still have speculation in the market that the ECB may shift to a less expansionary policy earlier than expected. We tend to disagree." "We think the potential for disappointment at the meeting today is bigger than the potential for a positive surprise, so this is rather something we see as gold negative from the currency side." Tighter monetary policy in the euro zone could be seen as either positive or negative for gold, depending on whether the market responds more favorably to a stronger euro, or less favorably to a rise in the opportunity cost of holding the non-yielding metal. The ultra-loose policy in place since the last decade's global financial crisis has 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 policy 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. "Investors remained cautious heading into today's ECB meeting," ANZ said in a note.
In other precious metals, silver was down 0.4 percent
to $16.17 an ounce after touching its highest in over two weeks at $16.36 in the previous session.
Platinum was 0.2 percent lower at $916.60 an ounce, while palladium was down 0.3 percent at $853.50 an ounce.
It hit a three-week high of $872.25 an ounce on Wednesday.
(Reporting by Jan Harvey; additional reporing by Nithin Prasad and Arpan Varghese in Bengaluru; Editing by Elaine Hardcastle)