A golden artefact.

London - Gold eased on Thursday as a retreat in European stocks and the euro prompted investors to cash in gains made the day before after the Federal Reserve reaffirmed its bond-buying programme and data showed a surprise dip in US growth.

The Fed left in place its monthly $85 billion bond-buying stimulus plan on Wednesday and repeated a pledge to keep purchasing securities until the outlook for employment “improves substantially”.

It indicated a recent slowdown in US growth was likely temporary, after data showed the US economy unexpectedly contracted in the fourth quarter.

Spot gold fell 0.1 percent to $1,674.36 an ounce by 13:11 SA time.

It hit a near one-week peak of $1,683.39 on Wednesday as speculation that better economic conditions could lead to an earlier-than-expected end to monetary easing evaporated.

“The Fed's statement should have helped gold today but we see a firmer US dollar, weakness in stocks and oil prices, which are all pulling the gold market lower,” Peter Fertig, consultant at Quantative Commodity Research said.

The euro halted its recent rally, falling below a 14-month peak against the dollar, while European shares fell for a second day as weak German retail sales and poor earnings at its biggest bank unnerved investors.

Usually, ultra-loose monetary policies lend support to gold. Previous rounds of Fed asset purchases drove down interest rates and weakened the dollar as well as spurring rallies in stocks and prompting some to turn to gold as an inflation hedge.

Analysts said that the market had already priced in that it would be premature for the US central bank to discuss abandoning the quantitative easing programme and that the reaction to the FOMC statement would be muted.

US gold futures for December delivery were down $5.20 an ounce at $1,674.70.


Investors are now waiting for nonfarm payrolls data on Friday for a close look at the US labour market. Economists surveyed by Reuters expect steady hiring from employers in January, helping unemployment to stand unchanged from a month earlier at 7.8 percent.

“The intense focus on employment means that this Friday's report remains crucial in forming market expectations on future policy,” UBS analyst Joni Teves said in a report. “Some adjustments to positioning are likely to emerge heading into tomorrow.”

Gold is still facing strong resistance at $1,700, which it failed to breach despite repeated attempts earlier in the month, analysts have said.

In the physical market, gold purchases lost steam this week as stockpiling in China and other Asian markets ahead of the Lunar New Year drew to a close and as Indian buyers remained on the sidelines, with ample inventory in hand.

The most active gold contract on the Tokyo Commodity Exchange rocketed to a record high after Prime Minister Shinzo Abe called on Japan's central bank to ease policy more aggressively. TOCOM's December contract marked 4,944 yen a gram, with prices gaining 6 percent since the start of the year on a weakening yen.

Spot silver followed gold's movements, losing 0.3 percent to $31.95, after a 2.7 percent rise to a session high of $32.23 the day before.

Spot platinum fell 0.7 percent to $1,670.72, while palladium was down 1.6 percent to $735, having hit a fresh 16-month high of $756 an ounce on Wednesday.

The more industrial precious markets are also monitoring global economic data, which should give clues on future demand from the important automotive sector.

“There is some profit-taking in the platinum group metals and the attention now turns to the Chinese PMI data to be released overnight and tomorrow's employment figures in the United States,” Fertig said.

“But platinum and palladium will outperform gold this year on stronger fundamentals,” he added. - Reuters