Spot gold hit a peak of $1540,54 an ounce and was bid at $1537,80 an ounce at 1354 GMT, against $1536,80 late in New York on Wednesday
Gold prices firmed to session highs above $1540 an ounce on Thursday as the European Central Bank signalled a rate hike may be forthcoming next month, after leaving interest rates unchanged for the moment.
Spot gold hit a peak of $1540,54 an ounce and was bid at $1537,80 an ounce at 1354 GMT, against $1536,80 late in New York on Wednesday. Gold priced in euros was up 0,6% at 1060,51 euros an ounce.
US gold futures for August delivery rose 30 cents an ounce to $1539,00 an ounce.
The ECB held interest rates at 1,25% on Thursday as expected. In a press conference following the decision, ECB head Jean-Claude Trichet said the bank is in "strong vigilance" mode over inflation pressures, using words that indicate an interest rate increase is probably only a month away.
"People are looking at the fact that the ECB has said there will be rate hikes maybe next month, rather than today’s announcement," said Societe Generale analyst David Wilson.
"You’d expect higher rates to strengthen the euro versus the dollar, and a weaker dollar is a support for gold."
The euro drifted lower after the ECB moves as investors booked profits, but traders still expect that as euro zone interest rates will climb faster than those in the United States, the euro will be firmly underpinned. [FRX/]
Sluggish US economic data has boosted expectations that US interest rates will stay at record lows, pressuring the dollar and weighing on benchmark Treasury yields. The end of the second round of quantitative easing measures in the United States this month could lead growth to stall once more. [US/]
Dollar weakness tends to lift gold prices, as it makes dollar-priced assets cheaper for other currency holders and boosts the precious metal’s appeal as an alternative investment.
EURO ZONE STILL SHAKY
In the medium term, ongoing concern over the financial health of the euro zone is set to support interest in gold as a haven from risk.
Greek bond yields rose on Thursday after European officials said more steps were needed to meet deficit cutting targets, with no clarity over how policymakers intend to resolve the country’s debt problems.
The EU, ECB and IMF mission to Greece said in a report obtained by Reuters on Wednesday that more aid for Greece could not be released until it corrected the under-financing in its adjustment programme.
These simmering concerns could shake gold out of its current summer lull, analysts said.
"Given the event risk surrounding Greece, the end of QE2 and the potential for an extended economic soft spot... these rangebound conditions are unlikely to last," UBS said in a note.
Physical gold demand in major consumer Asia stalled as prices held at elevated levels, although little scrap gold is being returned to the market, dealers said.
"Scrap is not hitting (the) market as the general belief is that the price trend is still on upside," said an official at a private bullion importing bank in Mumbai.
Silver was at $37,18 an ounce against $36,79, and platinum at $1830,50 an ounce versus $1819,50.
Palladium (XPD=) was at $809,47 an ounce against $799,18, having touched a three-month high of $810,75 earlier in the day.
Data on Thursday showed car sales numbers from Asia, usually a rare bright spot in the car sales market last year, were relatively soft in May.
The official China Association of Automobile Manufacturers said on Thursday that Chinese car sales dipped last month for the first time in more than two years, by 0,1%. Car sales in India rose 7% in May, their slowest pace of growth in two years.
The latest update of China’s vehicle trade-in incentives will have limited impact in boosting auto demand in the world’s largest market, Nomura said on Thursday.
