Gold falls on ECB, Fed tightening prospect

Gold prices have fallen after a European Central Bank (ECB) official calls for scaling back the bank’s stimulus program, although losses were capped when weaker-than-expected US economic data raised questions about further interest rate hikes.

ECB board member Sabine Lautenschlaeger made the most explicit call so far from an ECB policymaker for paring the bank’s 2.3 trillion euros money-printing program.

“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 program.

Spot gold was down 0.6 per cent at $US1,321.88 an ounce by 1.47 pm Friday EDT (0547 Saturday AEST). It was down 1.8 per cent for the week, on track for its biggest weekly decline since early July.

US gold futures for December delivery settled down 0.3 per cent at $US1,325.20.

Those “normalisation” actions by central banks tend to pressure gold.

Gold briefly pared losses on news that US retail sales unexpectedly fell in August and industrial output dropped for the first time since January, in contrast to Thursday’s strong US inflation data.

Gold largely shrugged off North Korea’s firing of another missile over Hokkaido, Japan.

“Markets are paying much more attention to global economic data,” said Rob Haworth, senior investment strategist at US Bank Wealth Management in Seattle.

“The synchronised global growth story is gaining momentum and the uptick in inflation seems to mean that the Fed has plans to make their planned moves.”

The Fed’s two-day monetary policy meeting begins on September 19.

Commerzbank said August gold imports into India, the world’s second biggest gold consumer, were the lowest so far this year.

In other precious metals, platinum’s discount to gold fell to around $US360, the lowest according to Reuters data dating back to 1985.

Platinum dropped 1 per cent to $US969 an ounce after touching $US959.95, the lowest since August 16. This is also around where the 50-day moving average crossed above the 200-day moving average. The metal was down 3.7 per cent for the week, on track for its biggest weekly drop since March.

Silver fell 0.8 per cent to $US17.61 and was set to mark its first weekly decline in four.

Palladium rose 0.2 per cent to $US924.10 and was heading for a second weekly decline.

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