Gold fell on Friday as hints of more monetary stimulus from the European Central Bank weighed on the euro and pushed European shares 3 percent higher, denting appetite for alternative assets, while oil rebounded. Benchmark Brent crude futures, which fuelled risk aversion with a slide to 12-year lows this, bounced 7.3 percent on Friday as traders cashed in on record short positions.
That fed into better appetite for assets viewed as higher risk, such as equities and industrial commodities, and weighed on gold. Spot gold was down 0.4 percent at $1,096.60 an ounce at 1235 GMT, while US gold futures for February delivery were down $1.70 at $1,096.50. The metal rose to a two-month high of $1,112 last week as equities and oil slid.
"It's a risk-on day, which in turn is negative for gold," Commerzbank analyst Carsten Fritsch said. "$1,100 to $1,115 is a tough level to overcome. Today there is a rebound in stock markets that certainly contributed to this drop, but I wouldn't rule out another push above that level if stock markets start to tumble again."
ECB President Mario Draghi said on Thursday that fading growth and inflation prospects will force the bank to review its policy stance in March, a strong signal that more easing could be coming within months. His comments lifted the dollar 0.6 percent against the euro and prompted a rally in beleaguered stock markets. "With equity markets remaining bid and oil continuing to squeeze higher, gold is likely to come under pressure and could test towards $1,085 in the short term," MKS said in a note.
Gold benefited this month from the risk aversion that hurt stocks and crude oil, though slow physical demand from major consumers China and India kept a lid on price gains. Premiums for gold in China rose only slightly this week and sellers in India offered discounts amid poor demand.
Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rose a by a further 1.8 tonnes on Thursday, data from the fund showed. That brought its inflow for the week to 4.2 tonnes. Among other precious metals, platinum and palladium, which are widely used in autocatalysts, and silver, a common component in electronics manufacturing, benefited from firmer appetite for industrial commodities. Platinum was up 2.2 percent at $835.54 an ounce, rebounding from the previous session's seven-year low of $806.31. Palladium gained 1.2 percent to $503.40. Silver rose 0.5 percent to $14.13.
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