Gold prices slipped on Thursday after the European Central Bank (ECB) gave no clear hints of further monetary easing and the Bank of England opted not to restart gilt purchases, with a weakening dollar offering only limited support. The euro rallied more than 1 percent after ECB president Mario Draghi gave no signal monetary policy would be loosened further. The bank had been expected to cut inflation and growth forecasts, giving Draghi room to cut rates in coming months.
"The euro strength, dollar weakness should obviously have helped gold a bit, but I think the gold market is focusing on the lack of dovishness in his (Draghi's) approach," said Ole Hansen, senior manager at Saxo Bank. Spot gold was down 0.4 percent at $1,577.60 an ounce at 1537 GMT, while US gold futures for April delivery were up 0.1 percent to $1,576.90.
Spot gold has fallen nearly 6 percent so far this year and is down about 18 percent from a record high of $1,920.30 an ounce hit in September 2011. Recent strong US data, including a better-than-expected jobs report on Wednesday, have brightened the mood on the markets and lifted the Dow Jones Industrial index to record highs over the past two sessions. "I suppose eventually we will come to the point where even though we get a stronger number, gold will not react as negatively as it's done before because I think we've seen most of the selling by now," said Saxo Bank's Hansen.
"Gold needs to start showing some strength in adversity." Australian bank Macquarie said on Thursday gold could average $1,530 an ounce this year, down from $1,668 in 2012, if investment demand remains weak. That would represent the first annual fall in average gold prices since 2001.
"Without a compelling new driver, weaker investment demand for gold is likely to continue on reduced tail risks, low inflation, and a lower prospect of more QE (quantitative easing)," the bank said in a note. Nomura cut its 2013 gold price forecast to $1,602 an ounce from $1,981 on Thursday, saying the investment environment for gold is deteriorating as economic recovery, rising interest rates and still benign Western inflation leave some investors rethinking their positions.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, stood unchanged at 1,244.855 tonnes on Wednesday, after 11 straight sessions of outflows. Investors pulled $5.6 billion from gold exchange-traded products (ETPs) in February after a poor performance by the yellow metal, but appetite for riskier, growth-oriented industrial metals ETPs remained intact.
In the physical market, buyers in China slowed their robust purchases of gold as gold bought in previous weeks started to arrive and eased a supply shortage. China's domestic gold prices had been trading at premiums of over $20 above international prices in the past few days, but that spread shrank to just over $10 on Thursday. It could further narrow to single-digit figures in the absence of another sharp fall in the international market, traders said.
Buying from India, the biggest gold consumer, also slowed as the approach of the end of the fiscal year dented interest. In other precious metals, silver was down 0.3 percent at $28.91 an ounce, spot platinum was up 0.3 percent at $1,588.75 and spot palladium added 1.4 percent at $754.97.
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