Gold price trims weekly gain as dollar strengthens on ECB move

The price of gold has fallen so far in today’s trading to trim its third consecutive weekly advance. The precious metal faced downward pressure as the US dollar strengthened after the European Central Bank (ECB) announced a multi-billion asset-purchasing programme to boost the eurozone’s economy.

Gold for immediate delivery had slid 0.44 percent, or $5.69, to $1,295.65 an ounce as of 09:06 GMT, and was trading 6.73 percent above its 50-day simple moving average of $1,213.91. However, the precious metal remains on track for its third straight weekly gain and has rallied 9.6 percent since the beginning of the year.
Demand for gold as a hedge against inflation rose yesterday after the ECB unveiled a large scale quantitative easing (QE) programme. Central bank officials pledged to buy up 60 billion euros (£46 billion) per month of sovereign bonds from March until the end of September next year in a bid to boost tepid economic growth and deal with deflation.

Gold has given back some of its recent gains as the DXY dollar index, which pegs the greenback against six of its major peers, touched an 11-year high of 94.724 during today’s session and was last up 0.61 percent at 94.654. Reuters cited Barnabas Gan, an analyst at OCBC Bank, as saying:
“There are two forces at play. The first is technical in the sense that the $1,300 handle appears to be a very strong resistance to gold at this juncture […] The second is the fact that dollar has been firmer after the ECB’s move.”

The Bullion Desk cited a note from MKS Capital saying that market volatility should be expected over the coming sessions as participants digest the QE package. Traders will now be looking ahead to Sunday’s snap election in Greece and next week’s US Federal Reserve monetary policy meeting.
On the COMEX in New York, gold for February delivery was down $6.2, or 0.47 percent, at $1,295.3 as of 09:07 GMT. Reuters quoted INTL FCStone analyst Edward Meir as saying that global economic uncertainty as well as positive chart patterns should keep gold higher, with $1,320 and $1,350 both “achievable upside targets”.