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Gold slips after ECB says it plans on tapering stimulus
MARKETWATCH 9:00 AM ET 12/8/2016
Symbol Last Price Change
GLD 111.83 0 (0%)
GDX 21.44 0 (0%)
QUOTES AS OF 08:00:00 PM ET 12/07/2016
Dollar rises, gains as euro retreats on ECB news

Gold futures traded lower Thursday, challenging the market to replicate Wednesday's recovery, as the dollar edged up against the euro after a European Central Bank decision to pare its bond-buying program.

Gold remains confined to relatively tight trading ranges with one closely watched central-bank meeting down, but another, the Federal Reserve's latest interest-rate gathering, still upcoming next week. Gold has been tracking the dollar and Treasury yields ahead of these interest-rate policy decisions, with a downside tilt.

"Any upside [for gold] is capped by the fear that the Fed will increase the interest rate next week. This is the primary reason that we have seen such a selloff for the metal," said Naeem Aslam, chief market analyst, at ThinkMarkets. "However, we do not think that there will be any serious selloff if the Fed would increase the interest rate. What matters for the market is how many interest rate hikes we are going to see in 2017."

Early Thursday, gold futures for February delivery slipped $5.40, or 0.5%, at $1,172.10 an ounce.

Read:New rules for gold investing may open the market to 1.6 billion Muslims (http://www.marketwatch.com/story/new- rules-for-gold-investing-may-open-the-market-to-16-billion-muslims-2016-12-07)

The ICE U.S. Dollar Index , which compares the buck to six other currencies, rose 0.3% at 100.9700. Strength in the buck can undercut demand for commodities, including gold, making them less attractive for holders of other currencies. The dollar did gain modestly against Europe's shared currency, with one euro worth $1.0738 compared to $1.0755 late Wednesday.

The European Central Bank on Thursday announced it will extend its quantitative easing program until December and consider more from there (http://blogs.marketwatch.com/thetell/2016/12/08/all-eyes-on-ecb-ahead-of-key-meeting-live- blog/). That "is more than what the market was expecting," added Aslam.

But, the ECB will reduce its bond-buying fire power after March and will only be purchasing 60 billion euro worth of debt. The bank did hold pat on interest rates, as expected.

As global bond yields readjust to less-easy monetary policy, gold has been increasingly reactive to intraday yield moves. Higher yields make nonyielding gold less attractive. The U.S. 10-year note yield has been hovering near 16- month highs, after a sharp advance in November following the U.S. elections.

Yields have risen along the yield curve, but especially at the shorter end, as the Fed is widely expected to raise short-term rates by a quarter point at its Dec. 13-14 policy meeting. Fed-funds futures (http://www.cmegroup.com/ trading/interest-rates/countdown-to-fomc.html), a popular tool for traders to bet on U.S. interest-rate policy, indicate an above-90% probability for such a move.

A report showing a drop in jobless benefits claims (http://www.marketwatch.com/story/jobless-claims-drop-10000-to- 258000-2016-12-08) only reinforced consensus expectations for a Fed adjustment to rates.

U.S. stock futures pointed to a slightly higher open (http://www.marketwatch.com/story/dow-sp-on-pace-to-hold-near- record-highs-as-ecb-grabs-spotlight-2016-12-08) Thursday, putting the Dow industrials and S&P 500 on track to trade near their record closes from the prior session.

March silver was at $17.10 an ounce, down 17 cents, or 1%. The U.S. Mint announced Tuesday that it has sold out of 2016-dated American Eagle one-ounce silver bullion coins--implying that physical demand for silver has been strong.

Among exchange-traded funds, the SPDR Gold Trust(GLD) traded 0.1% lower, while the iShares Silver Trust ETF (SLV) fell 0.5%. The VanEck Vectors Gold Miners ETF(GDX) slipped 0.2%.

-Rachel Koning Beals; 415-439-6400; [e-mail]


(END) Dow Jones Newswires
12-08-160900ET
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