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Gold tumbles as dollar jumps against euro on dovish Draghi comments

Published 09/03/2015, 08:56 AM
Updated 09/03/2015, 08:56 AM
© Reuters. Gold futures fall to session lows as dollar jumps on Draghi comments

© Reuters. Gold futures fall to session lows as dollar jumps on Draghi comments

Investing.com - Gold futures fell to the lowest levels of the session on Thursday, as the euro sank against the dollar after European Central Bank President Mario Draghi said the central bank will use all instruments available if needed to stimulate the economy and boost inflation.

The comments came after the ECB held its interest rate at a record-low 0.05%. The central bank also kept its marginal lending at 0.30% and left its deposit facility rate unchanged at -0.20%.

The central bank cut its growth and inflation forecasts due to ongoing falls in oil prices and slowing growth in China.

The euro lost 1% against the dollar, while the dollar index, which measures the greenback's strength against a basket of other major currencies, was up 0.6% to 96.47, the strongest level since August 20.

Gold for December delivery on the Comex division of the New York Mercantile Exchange dropped $11.10, or 0.98%, to trade at $1,122.50 a troy ounce during U.S. morning hours.

A day earlier, gold dropped $6.20, or 0.54%, as a broadly stronger U.S. dollar and surging equity markets dampened the appeal of the yellow metal.

Meanwhile, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits increased by 12,000 to 282,000 last week. Analysts had expected initial jobless claims to rise by 5,000 to 275,000 last week.

First-time jobless claims have held below the 300,000-level for 26 consecutive weeks, which is usually associated with a firming labor market.

A separate report showed that the U.S. trade deficit narrowed 7.4% in July to $41.9 billion, as exports edged up 0.4% and imports fell 1.1%.

Market participants now looked ahead to Friday’s nonfarm payrolls report, which could help to provide clarity on the likelihood of a near-term interest rate hike.

The consensus forecast is that the data will show jobs growth of 220,000 last month, following an increase of 215,000 in July, while the unemployment rate is forecast to decline to 5.2% from 5.3%.

A strong jobs report was likely to add to indications that the Federal Reserve will raise rates in September, while a weak number could push back expectations to December.

Recent turmoil in global financial markets has raised doubts over whether the Fed will hold off hiking interest rates from record lows at its upcoming policy meeting on September 17.

The timing of a Fed rate hike has been a constant source of debate in the markets in recent months.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

Elsewhere in metals trading, copper for December delivery on the Comex division of the New York Mercantile Exchange rallied 4.3 cents, or 1.85%, to trade at $2.372 a pound.

Copper's gains came as a sharp rebound in global equity markets helped soothe investors' tattered nerves.

The red metal sank to a six-year low of $2.202 on August 24 as concerns over the health of China's economy and steep declines on Chinese stock markets dampened appetite for the red metal.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

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