LONDON: Gold fell on Wednesday as the dollar rose against the euro on the prospect of more stimulus from the European Central Bank, but moves remained muted as physical demand lent support.
The euro eased after European Central Bank vice president Vitor Constancio said the bank will be able to gauge in the first quarter of 2015 whether it needs to start buying sovereign bonds. Recent strong US economic data has fuelled talk that the Federal Reserve could soon raise rates.
Divergence between Fed monetary policy and that of other central banks is seen as lifting the dollar, while higher interest rates raise the opportunity cost of holding non-yielding bullion.
Spot gold was down 0.4 percent at $1,195.90 an ounce at 1037 GMT, while US gold futures for December delivery were down $2.70 an ounce at $1,194.40.
"At the moment we have a stand-off situation," LBBW analyst Thorsten Proettel said. "On the one side, we have the prospect of higher interest rates in the United States, which is not a situation in which the gold price can move higher. On the other, we're seeing some greater demand for gold from Asia."
China's net gold imports from main conduit Hong Kong hit a seven-month high in October, according to official Hong Kong data released on Tuesday.
Gold saw some buying interest in Asia overnight, MKS said in a note, though that was not enough to push prices much higher. "Some decent volume went through the Shanghai Gold Exchange today, mainly on the buy side, which helped shift the premium out to $1.00-$2.00," it said.
Traders are awaiting more US data due later in the day, including capital goods orders, jobless data and new home sales numbers, for further clues on the outlook for monetary policy.
Gold has seen quiet trading since recovering from a four-and-a-half year low earlier this month. Speculation that Switzerland could vote in favour of a motion to raise its gold reserves has underpinned prices.
Among other precious metals, silver was down 0.6 percent at $16.54 an ounce, while platinum was up 0.2 percent at $1,217.49 an ounce and palladium was up 0.9 percent at $796.50 an ounce.
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