Gold weighed down by prospects of ECB and Fed tightening
London — Gold fell on Friday after a European Central Bank (ECB) official called for scaling back the bank’s stimulus programme, although losses were capped when weaker than expected US economic data raised questions about further rate hikes.
ECB board member Sabine Lautenschläger made the most explicit call so far from an ECB policy maker for paring the bank’s ¤2.3-trillion money-printing programme.
Data showing that eurozone wages grew at their fastest rate in two years in the second quarter bolstered the case for reining in ECB stimulus.
"For gold this is bad news because this continues the trend of the market pricing in the normalisation of monetary policy," said Jens Pedersen, senior analyst at Danske Bank in Copenhagen. But he said there had already been plenty of headlines about the ECB planning an exit from its bond-buying and the US Federal Reserve reducing its balance sheet after its big quantitative easing programme. "It’s difficult to see gold really falling much further on this policy normalisation agenda."
Spot gold was down 0.4% at $1,324.58 an ounce by 1.50pm GMT. It was down 1.5% for the week, on track for its first weekly decline in four.
US gold futures for December delivery fell 0.1% to $1,328.30.
These "normalisation" actions by central banks tend to drive rates higher, push bond yields up and put pressure on gold, a non-yielding asset. Gold pared losses after data on Friday showed that US retail sales unexpectedly fell in August and industrial output dropped for the first time since January due to the impact of Hurricane Harvey.
Friday’s numbers were in contrast to strong US inflation data on Thursday which increased prospects of an interest rate hike in December. The Fed’s next monetary policy meeting begins on September 19.
Gold largely seemed to shrug off the firing of another missile by North Korea on Friday that flew over Japan’s northern island of Hokkaido.
Commerzbank said August gold imports into India, the world’s second biggest gold consumer, were the lowest so far this year. "Potential buyers have clearly been put off by the sharply rising gold price," a note said. "If gold prices do not fall, the usual recovery of Indian gold demand in the autumn is likely to prove less pronounced this year."
Silver fell 0.6% to $17.64 an ounce and was set to mark its first weekly decline in four.
Platinum dropped 0.8% to $970.80 an ounce after touching $968.30, the lowest since August 25. It was down 3% for the week, on track for its biggest weekly drop since early May.
Palladium shed 0.5% to $918, after marking a four-week low on Thursday. It was heading for a second weekly decline.