Gold Slips Ahead Of ECB, US Data

Gold edged lower on Thursday, ahead of key U.S. jobs data and a European Central Bank (ECB) policy meeting later, while a gold import duty hike in India raised worries about future demand.

The Indian government raised imports tax on the metal for the second time this year on Thursday.

Spot gold fell 0.3 per cent to $1,399.16 by 0944 GMT. U.S. gold futures for August delivery were unchanged at$1,398.10 an ounce.

The metal had gained slightly on Wednesday as investors looked for safer assets after a private U.S. jobs reading fell short of expectations.

“Prices are likely to hover around current levels ahead of the ECB meeting this afternoon, as investors will watch to see whether (ECB) President Draghi talks about negative interest rates,” Danske Bank analyst Christin Tuxen said.

The prospect of negative real interest rates would be positive for non-interest-bearing assets like gold.

“And of course people are looking at tomorrow’s U.S. non-farm payrolls, which will be instrumental to judge whether the Fed tapering is going to come sooner rather than later – whether it is in September or December that this will be announced is the big question for everything that is dollar sensitive at the moment, including gold,” Tuxen added.

U.S economic data has been in the spotlight since the Federal Reserve Chairman Ben Bernanke said last month the central bank would taper off monetary stimulus – it is currently purchasing monthly bonds for $85 billion – if the U.S. housing and job markets showed continued strengthening.

U.S. jobless claims and the ECB policy announcement are the main data highlights ahead of non-farm payroll data on Friday, which will be scrutinized by investors for clues on when the Fed will begin possible tapering its bond buying.

Holdings of SPDR Gold Trust, the largest gold-backed ETF, fell 0.3 per cent on Tuesday after holding up for nearly a week. Holdings, which had declined for nearly three weeks before that, are at four-year lows.

On the physical side, the Indian government increased its import duty on gold by a third to eight per cent on Wednesday after imports hit 162 tonnes in May, twice the monthly average of 2011 when they reached a record.

The country’s officials said they will continue to take steps to discourage gold buying in an effort to cut its import bill if needed.

HSBC analyst James Steel said that while the duty hike may make bullion more expensive in India, gold prices in local currency terms are still trading at lower levels compared to last year and are still attractive to physical buyers.

Gold futures in Shanghai were around $20 above spot prices, indicating that it is cheaper for the Chinese to buy gold from overseas.

Silver fell 0.2 per cent to $22.47 an ounce, platinum was down 0.3 per cent to $1,504.49 an ounce and palladium dropped one per cent to $748 an ounce.