LONDON: Gold retreated on Thursday ahead of a European Central Bank meeting that could lead to further monetary stimulus, after the dollar's rise to two-year highs versus the euro prompted investors to cash in some of the previous day's gains.
The metal held onto the $1,200 an ounce level, however, as consumers in Asia continued to buy and on uncertainty ahead of the ECB meeting and the release of U.S. payrolls data on Friday.
Spot gold was down 0.6 percent at $1,201.40 an ounce at 1104 GMT, while U.S. gold futures for December delivery were down $7.00 an ounce at $1,201.70.
The euro fell to less than $1.23 for the first time in more than two years on Thursday, finding few friends in a market that is wagering the ECB will be forced to inject even more stimulus into a moribund euro zone economy.
It later steadied, but remained depressed, keeping up pressure on gold.
"Generally European easing has played out on gold via a stronger dollar (and) weaker gold prices," Citi analyst David Wilson said. "(Though) it seems to me that there is a decent physical floor which is going to prevent gold from dipping too low."
Demand from Asian consumers has been firm this week. India, the world's second-biggest consumer of the metal, last week scrapped a rule mandating traders to export 20 percent of all gold imported into the country.
After the ECB announcement on Thursday, then Friday's U.S. payrolls data will help investors gauge the strength of the U.S. economic recovery and how it will impact interest rates.
"We expect gold to be supported should the U.S. payroll number disappoint and weaken if it exceeds expectations," HSBC said in a note.
A run of upbeat U.S. data has supported the view that the Federal Reserve will tighten monetary policy before other central banks.
A rise in U.S. interest rates would lift the opportunity cost of holding non-yielding gold and further boost the dollar. That would make dollar-denominated gold more expensive for holders of other currencies.
Silver was up 0.2 percent at $16.43 an ounce. Platinum was up 1.2 percent at $1,233 an ounce, while palladium was up 0.2 percent at $794.75 an ounce.
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