Gold futures settled sharply lower Thursday, reversing a morning climb, after the European Central Bank's decision to signal its plan to ease monetary policy disappointed investors by not including immediate action or details of its likly efforts.
The ECB said it stood ready to cut interest rates and deliver "highly accommodative" monetary policy, including additional asset purchases, in its effort to push stubbornly low inflation back toward its target amid signs of deteriorating economic conditions in the eurozone.
August gold on Comex GCQ19, +0.27% lost $8.90, or 0.6%, to finish at $1,414.70 an ounce, on marking its sharpest slide since July 5 when the most-active contract fell $20.80, or 1.5%, according to FactSet data.
Bullion's reversal, after touching an intraday peak at $1,434.10 an ounce, came as investors digested comments from ECB President Mario Draghi, as well as slightly better-than-expected U.S. economic data which may downgrade the case for aggressive action by the Federal Reserve when its rate-setting committee convenes next week.
"The gold market may have been a bit disappointed by the ECB not lowering interest rates today," Jim Wyckoff, senior analyst at Kitco.com told MarketWatch.
He said, however, that the bullish theme for the metal remains intact as "Draghi sounded awfully dovish on easing on monetary policy," when the central bank meets in September.
The announcement comes as the Fed is widely expected to cut interest rates by a quarter-of-a-percentage point at the end of its July 30-31 gathering next week.
Market participants lamented that Draghi didn't offer details. The euro initially dived following the statement, while European bonds rallied, pushing down yields. Those moves were mostly reversed during Draghi's news conference with reporters.
The direction change for many asset prices on Thursday also occurred as new U.S. applications for jobless benefits fell to 206,000 during the week ended July 20, below the 218,000 expected by economists, near historic lows, while U.S. orders for long-lasting manufactured goods rose in 2% in June, above the 0.7% increase expected by economists polled by MarketWatch and the 2.3% decline in May
The data may support worries that the Fed may be less inclined to lower interest rates aggressively because the economy remains mostly healthy.
A global regime of lower interest rates can make precious metals, which don't offer a yield, more attractive to investors.
"On the technical front, spot gold needs to trade over $1430 till close to rise to $1449 and $1461. Key price to watch for gold is $1430," Chintan Karnani, chief market analyst at Insignia Consultants, told MarketWatch.
In other metals dealings, September silver SIU19, -0.01%, shed 21.5 cents, or 1.3%, to settle at $16.411 an ounce, marking its sharpest daily slump since July 5, a day after tallying its eighth gain in nine sessions.
September copper HGU19, -0.46% lost less than a penny, or 0.3%, at $2.7035 a pound. October platinum PLV19, -0.62% fell $7.10, or 0.8%, to $874 an ounce and September palladium PAU19, -0.26% declined $4.60, or 0.3%, at $1,533.90 an ounce.
Among exchange-traded funds, SPDR Gold Shares GLD, +0.16% fell 0.8%, while the iShares Silver Trust SLV, -0.33% lost 1.4%.