Gold steadies along with euro ahead of ECB meeting

Tue Jul 31, 2012 10:24am EDT
 
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By Jan Harvey

LONDON (Reuters) - Gold steadied on Tuesday in line with the euro as investors took to the sidelines ahead of this week's European Central Bank meeting, weighing up the prospects of definite action to tackle the euro zone debt crisis.

The metal rose through $1,625 an ounce for the first time since mid-June on Friday and the euro hit a three-week high against the dollar after ECB chief Mario Draghi pledged to do anything necessary to protect the single currency from collapse.

But that surge has lost steam as investors consider the prospect of Draghi disappointing the markets. While the ECB has raised expectations of some kind of announcement on the bloc's burgeoning debt crisis, concrete action may still be weeks away.

"Uncertainty is growing regarding the outcome of the ECB meeting on Thursday. In this context, the gold market may trade largely sideways ahead of the meeting," Anne-Laure Tremblay, analyst at BNP Paribas, said.

"However, given the publication of U.S. nonfarm payrolls on Friday, any market reaction to the ECB meeting may prove short-lived," she added. The non-farm payrolls numbers are a key barometer of the health of the U.S. economy.

Spot gold was little changed at $1,620.76 an ounce at 10:06 a.m. EDT (1406 GMT), while U.S. gold futures for August delivery were flat at $1,620.10.

The euro held steady against the dollar, but stayed off three-week highs as traders tempered expectations for the ECB meeting. European shares eased and German Bund futures extended gains. <GVD/EUR> .EU <FRX/>

Gold priced in euros was flat at 1,321.36 euros an ounce, but held near Monday's five-month high. It has outperformed spot prices this month, up 4.7 percent so far in July, against a 1.3 percent rise in dollar gold.   Continued...