Thursday May 8, 09:47 AM
Metals - Gold eases as dollar extends gains ahead of ECB rates meeting UPDATE
(Updating with full report)
LONDON (Thomson Financial) - Gold eased a touch in early trade as the U.S. dollar extended gains against the euro ahead of today's rate-setting meeting of the European Central Bank, but with firm crude oil prices and concerns over rising inflation lending support.
The ECB is widely expected to leave rates on hold at 4 percent, but the market will be watching for any suggestion in its accompanying statement that it will consider a rate cut later this year.
Such a move could weaken the euro further, boosting the dollar and consequently reducing gold's appeal as an alternative investment.
'Given the importance of today's rate meetings the dollar seem set to provided much of the days trading direction,' said TheBullionDesk.com analyst James Moore.
The dollar has already benefited in recent weeks from suggestions that the U.S. Federal Reserve may pause in its rate-cutting cycle, and from Fed officials' increased emphasis on inflation risks in recent statements.
At 9:21 a.m., spot gold was trading at $868.58 per ounce against $870.00 in late New York trade on Wednesday.
However, concerns over near-record oil prices and rising U.S. inflation, against which gold is often bought as a hedge, are keeping gold well-supported. Oil hit a new all-time high of $123.93 in late trade yesterday.
Increased jewellery buying during this week's Akshaya Tritiya festival -- an auspicious time for buying precious metals -- in the world's biggest gold market, India, was also expected to lend support to the market.
However, high and volatile prices are crimping demand for the metal among traditional buyers, analysts said.
'Traditionally gold sales surge in India for the Akshaya Tritiya (festival),' said Fairfax analyst John Meyer. 'However, sales may be off 30 percent in response to high prices and volatility for the metal putting customers off purchases.'
Among other metals, silver eased to $16.51 an ounce from $16.65.
Elsewhere, platinum rose to $1,970 an ounce against $1,958, while palladium was trading at $421 against $420.
'We would... view platinum as relatively immune (to) dollar strength relative to other parts of the precious metals sector given the possibility of ongoing production problems in South Africa,' said Deutsche Bank (Frankfurt: DB9999 - news) analysts.
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