Gold fell on Thursday after the European Central Bank held interest rates at record lows but refrained from adding new stimulus as some investors had expected. Global equities also tumbled on disappointment that ECB chief Mario Draghi said the bank had not even discussed an extension of quantitative easing. "The market was hoping for more from Draghi and he didn't give it to them," said Rob Haworth, senior investment strategist for US Bank Wealth management in Seattle.
"I think there's not enough yet for speculators to increase their bullish sentiment and in the end, the market is thinking the odds of the Fed raising rates for probably December keep inching higher." Spot gold fell 0.6 percent to $1,337.4 an ounce by 2:39 pm EDT (1839 GMT), with US gold futures settling down 0.6 percent at $1,341.6. Accommodative monetary policies favour gold and equities because low interest rates encourage investors to opt for assets that do not rely on interest yields.
Gold has moved in a narrow range lately, with bullion closely tracking the dollar. The metal is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which the metal is priced. Gold has given up much of its strong gains from earlier in the week, when weak US jobs data led investors to bet that a September rate rise was no longer on the cards, weakening the dollar.
The dollar index, which measures the greenback against a basket of currencies, edged up 0.1 percent to 95.052. "We had another couple of data points this week in the US that pointed perhaps to the economy not yet being strong enough to sustain another interest rate rise in the short term," said Mitsubishi analyst Jonathan Butler.
The US central bank's policy-setting Federal Open Market Committee meeting is scheduled for September 20-21. Spot gold faces resistance at $1,352 an ounce and will likely stay below that level, with support at $1,327, Reuters technical analyst Wang Tao said. Platinum fell 0.6 percent to $1,078.2 an ounce after hitting a two-week high on Wednesday. In its latest Platinum Quarterly report, the World Platinum Investment Council forecast a 520,000-ounce deficit in the platinum market this year, up from a 455,000-ounce shortfall predicted three months earlier. Palladium was down 0.25 percent at $685.25 while silver was down 0.89 percent at $19.58 an ounce.