Gold eased for a second day after US data showed a healthy pace of growth in the US services sector, having earlier risen on the back of more muted expectations for eurozone rate rises. Hawkish rhetoric from the ECB had raised expectations that it might move towards raising interest rates sooner rather than later, boosting the euro but weighing on gold, which tends to benefit from a low interest rate environment.
On Thursday, European Central Bank President Jean-Claude Trichet signalled no change to the bank's low interest rate policy. Spot gold was bid at $1,328.70 an ounce at 1532 GMT, against $1,336.00 late in New York on Wednesday, having earlier touched $1,337.40. US gold futures for April delivery fell $2.90 to $1,329.20.
"(Trichet) was indeed pulling a bit away from the rhetoric from a couple of weeks ago... pushing out the timing of rate hikes and thereby also increasing the risk of inflation," said Ole Hansen, senior manager at Saxo Bank. "(That is) probably the reason why gold has rallied a bit despite its current state of fatigue."
The US dollar extended gains against the euro after stronger-than-expected data on US services sector activity. A stronger dollar usually pressures gold. "Since the sell-off across the commodity complex in early January, oil and industrial metals have rallied but the precious metals have been the laggards," said RBS analyst Daniel Major. "That is due to a combination of better economic data (and) less need for safe havens."
Concerns over the fallout from unrest in Egypt underpinned prices, but did not spark fresh investment, analysts said. "Whilst the Egyptian events have clearly had some kind of risk-negative impact on equity markets and the broader commodities complex, I don't think it has been sufficient to drive investors in Europe and the United States into gold," Major said.
Buying was also lacklustre in key gold consuming regions, with buyers absent in China, Hong Kong and Singapore for the Lunar New Year holiday. Silver was bid at $28.08 an ounce against $28.36. The world's largest silver-backed exchange traded fund, the iShares Silver Trust, reported another outflow on Wednesday.
Both the iShares fund and the biggest gold ETF, the SPDR Gold Trust, saw hefty outflows in January, with the iShares seeing its biggest ever one-month decline and the SPDR fund its second-largest such outflow. Platinum was at $1,822 an ounce against $1,829.99, while palladium was at $806.47 versus $811.22. Data showed Switzerland, one of the leading clearers of platinum group metals in Europe, imported 6,374 kg of platinum and 829 kg of palladium in December.