Forexpros – Gold futures came under heavy selling pressure during U.S. morning trade on Thursday, falling to the lowest levels of the day as the U.S. dollar strengthened broadly after the European Central Bank cut its benchmark interest rate to a record low.
Reduced expectations for further monetary easing measures by the Federal Reserve following the release of upbeat U.S. employment data further weighed.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,601.65 a troy ounce during U.S. morning trade, tumbling 1.25%.
It earlier fell by as much as 1.4% to trade at a session low of USD1,597.65 a troy ounce, which was the lowest since July 3.
Gold futures were likely to find support at USD1,551.35 a troy ounce, the low from June 29 and near-term resistance at USD1,634.25, the high from June 19.
Gold’s losses came as the euro tumbled below the key 1.24-level against the U.S. dollar after ECB President Draghi said that the economic outlook faces downside risks, adding that indicators for the second quarter point to weakening growth in the euro zone.
Draghi said that there was probably a “renewed weakness in economic growth” in the last three months, with “heightened uncertainty”.
Draghi also refused to speculate on the chances of a third round of Long Term Refinancing Operations, in which it would provides cheap loans to European banks in an attempt to encourage them to lend.
The comments came after the central bank cut its benchmark interest rate to a record low 0.75% in July, in a bid to bolster faltering growth in the region.
The central bank also lowered its marginal lending to 1.50% from 1.75% and the deposit facility rate to 0% from 0.25%.
Meanwhile, the greenback found support after positive U.S. employment data eased expectations for further monetary easing measures by the Federal Reserve.
The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending June 30 fell by 14,000 to a seasonally adjusted 374,000, compared to expectations for a decline of 3,000 to 385,000.
The previous week’s figure was revised up to 388,000 from a previously reported 386,000.
The data came after payroll processing firm ADP said non-farm private employment rose by a seasonally adjusted 176,000 in June, easily surpassing expectations for an increase of 105,000.
The previous month’s figure was revised down to a gain of 136,000 from a previously reported increase of 133,000.
Investors had been eyeing Thursday’s U.S. data amid speculation that the Federal Reserve could implement a third round of quantitative easing to shore up the economy, which has been hit by the ongoing crisis in the euro zone.
While not viewed as a reliable guide for the government jobs report due Friday, it does give guidance on private-sector hiring.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.9% to trade at 83.00.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal’s appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Policy moves from the Bank of England and the People’s Bank of China were also in focus.
The Bank of England left its key lending rate at 0.5% but lifted its asset purchase program by GBP50 billion pounds, in order to shield the recession hit U.K. economy from the ongoing debt crisis in the euro zone.
Elsewhere, China’s central bank cut interest rates for the second time in two months on in an effort to boost slowing growth in the world’s second largest economy.
The People’s Bank of China unexpectedly announced that it had lowered its benchmark interest rate by 0.31% to 6.00% from 6.31% effective July 6.
Elsewhere on the Comex, silver for September delivery plunged 2.4% to trade at USD27.59 a troy ounce, while copper for September delivery fell 1.65% to trade at USD3.481 a pound.
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