EU Central Bank stimulus boosts stocks, dollar

Gold dropped from a one-year high as gains in stocks and the dollar cut demand for a haven in the aftermath of more European Central Bank (ECB) stimulus.

The dollar climbed against the euro and European equities erased losses made on Thursday when ECB President, Mr Mario Draghi announced more policy measures.

Gold and currency markets were whipsawed yesterday when the stimulus news was followed by Mr Draghi asserting that he didn’t see any need to cut interest rates further.

“The dust has settled and the ECB action is finally supporting the market,” John Meyer, an analyst at SP Angel Corporate Finance in London, said told Bloomberg. “The stronger dollar is obviously a negative for gold.”

Bullion for immediate delivery declined 0.6 per cent to US$1 264.85 an ounce by 10:52am in London, according to Bloomberg generic pricing.

It earlier touched US$1 284.64, the highest since February 2015.

Mr Draghi’s stimulus is a response to deflation concerns in the euro area as well as subdued demand in emerging economies and volatility in financial markets.

Demand for a protection of wealth boosted gold prices by 19 per cent this year, making the metal the best-performing commodity.

Investors have purchased gold through exchange-traded products on all but six days this year.

Holdings rose 7.8 metric tons to 1 735.9 tons as of Thursday, the highest since July 2014, according to data compiled by Bloomberg.

The FTSE/JSE Africa Gold Mining Index was little changed as it headed for a 3.8 per cent weekly decline. The gauge reached the highest since 2013 on March 4. Silver fell 0.3 per cent to $15.5586 an ounce.

Palladium lost 0.2 per cent and platinum retreated 0.3 per cent. —Bloomberg