Gold prices dropped from the highest in five months after two European Central Bank officials said policy makers would propose the purchase of 50 billion euros in assets per month through the close of 2016.
The metal fell to below $1300 per ounce after worries of the global economy cooled after the ECB reports.
The Euro pared gains briefly after the report while US stocks dropped.
Tai Wong, director of commodity products trading at BMO Capital Markets Corp, was quoted by Bloomberg as having said, “Some market participants are disappointed so far with the amount of stimulus being discussed. People will want the details tomorrow, and I think a fair bit of uncertainty remains in the market, which will keep gold supported, but at lower levels.”
In early trade, spot gold reached the highest level since August 18 at $1,303.20 per ounce and was last down at $1,288 per ounce by 0.4%.
According to CNBC, US gold futures for February delivery dropped 0.5% to $1,288 per ounce. It has hit $1,307 per ounce the highest level since August 15.
Against the basket of currencies, the dollar dropped 0.2%, mainly due to the stronger yen after the Bank of Japan kept its monetary policy steady against expectations for more easing.
Traders expect the prospects of the looming deflation and increase in market volatility to support he demand for gold.
Matthew Turner, Macquarie analyst said, “We have seen this month the largest SPDR inflows since August 2012 when the Fed was revving up to do QE3 so the ECB QE is having a smilier impact.”
He added, “The issue seems to be about central banks’ control of the situation- there is this impression that things are getting a bit out of control again. The risk here for gold is that tomorrow and then next week at the Fed meeting they reassert their control.”
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