Gold eases in Europe

Gold eased on Thursday as a run higher in equities tempered upward momentum in the precious metal, though uncertainty over the direction of US monetary policy helped to keep prices above $1,200 an ounce. Strength in the dollar, which rose half a percent against the euro, added to pressure on the precious metal. Spot gold was down 0.1 percent at $1,207.71 an ounce at 1438 GMT, while US gold futures for April delivery fell 0.3 percent to $1,208.30.
Stock markets firmed in Europe and opened higher in the United States as benchmark Brent crude oil prices rose nearly 3 percent. Sharp losses in oil and stocks drove gold to a one-year high at $1,260.60 an ounce last week. "$1,260 was too high an increase in a short period of time. Gold was overbought," LBBW analyst Thorsten Proettel said. "What we've now seen is a consolidation. I would expect the gold price (retreat) to go deeper. After that gold can move to higher regions, but right now we need to let this consolidation pass."
Inflows into gold-backed exchange-traded funds (ETFs), holdings of which have already risen this year by more than they fell in the whole of 2015, showed investor appetite has sharpened, analysts said. Financial market volatility has increased expectations that the Federal Reserve may hold off hiking interest rates further this year. Gold fell 10 percent last year in anticipation of the Fed lifting rates for the first time in nearly a decade.
Minutes from the US central bank's last policy meeting, released on Wednesday, showed Fed policymakers worried last month that tighter global financial conditions could hit the US economy and considered changing their planned path of interest rate hikes in 2016. They still expect to raise rates this year and even discussed a rise at the January 26-27 policy meeting, but were divided over how to interpret financial market volatility.
Gold tends to benefit from lower rates, which cut the opportunity cost of holding non-yielding assets. "At the moment there's enough support in terms of negative interest rates and further flows into ETFs to suggest that for the time being as gold consolidates, prices will be well supported," Societe Generale analyst Robin Bhar said. "There's still huge debate about how the Fed will approach interest rate increases." Silver was down 0.1 percent at $15.25 an ounce, while platinum was down 0.9 percent to $936.06 and palladium was down 0.7 percent to $507.51.