Gold slips below $1,620 as euro retreats

Mon Jul 30, 2012 10:04am EDT
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By Jan Harvey

LONDON (Reuters) - Gold eased below $1,620 an ounce on Monday, taking its cue from a weaker euro ahead of key central bank meetings this week, as investors weighed up the prospect of the European Central Bank taking fresh measures to combat the euro zone debt crisis.

The metal climbed 2.5 percent last week, its best weekly performance in eight, after ECB President Mario Draghi pledged to do whatever necessary to prop up the euro.

But caution ahead of the ECB's meeting on Thursday, which will be watched for signs that Draghi's pledge will be backed with action, has since pulled the metal off its highs, though it remains supported just below $1,620 an ounce.

Spot gold was down 0.3 percent at $1,618.09 an ounce at 7:14 a.m. EDT (1114 GMT), while U.S. gold futures for August delivery were down 40 cents an ounce at $1,617.60. Spot prices are on track for a 1.3 percent gain in July.

"The market will be very disappointed if Draghi doesn't deliver," Commerzbank analyst Daniel Briesemann said. "The expectations for the upcoming ECB meeting are very high, and he must say something really significant.

"If he fails to do so, we will probably see lower commodity prices across the board, due to a stronger U.S. dollar."

Gold stayed under pressure on Monday as the euro fell 0.7 percent against the dollar, with traders taking profit on last week's gains.

The metal has been held in check this year by losses in the euro and consequent gains in the dollar, which make assets priced in the U.S. currency more expensive for other currency holders and curb gold's appeal as an alternative holding.   Continued...

Gold Bullion from the American Precious Metals Exchange (APMEX) is seen in this picture taken in New York, September 15, 2011. REUTERS/Mike Segar