LONDON (Reuters) - Gold prices fell to one-week lows on Thursday after European Central Bank chief Mario Draghi disappointed investors expecting him to outline bolder action to contain the euro zone debt crisis in a key policy statement.
Draghi boosted hopes for action to help the euro last week when he said he would do whatever necessary to protect the single currency, helping gold rally to $1,629.10 an ounce, its highest since mid-June.
It fell back below $1,590 an ounce, however, after Draghi announced no immediate measures to stem the euro zone debt crisis on Thursday. The euro surrendered gains, European shares fell and Spanish and Italian government bond yields rose. <GVD/EUR> <FRX/> <MKTS/GLOB>
"Draghi came and failed to deliver," Ole Hansen, senior vice president at Saxo Bank, said. "It shows how fragile the situation currently is that people look more towards the central bank for support then their governments."
"Having failed to deliver and with the euro back to levels from before his speech (last week), the market once again will have to turn to the politicians. With no new meetings or initiatives in the pipeline August will be hotting up."
Spot gold fell as low as $1,587.80 an ounce and was down 0.1 percent at $1,596.66 an ounce at 10:02 a.m. EDT (1402 GMT). U.S. gold futures for December delivery were down $7.60 an ounce at $1,599.70.
Draghi said, in a statement delivered after the ECB opted to hold euro zone interest rates at 0.75 percent, that the bank will draw up a mechanism in the coming weeks to make outright purchases to stabilize stressed euro zone borrowing costs.
The ECB said it would wait to see whether inflation and the euro zone economy slow further before deciding on any fresh cut in borrowing costs.
"Once again, we have strong words but no action," Marex Spectron said in a note. "The European leadership have continually confused saying with doing."
"Although there may be some initial disappointment, Draghi has probably been specific enough about ECB intentions for markets not to fall apart completely," it added. "Whether he actually has the mandate to do what he suggests is another matter."
South Korea said late on Tuesday that it bought 16 metric tons (17.63 tons) of gold in July, its second purchase this year. It is one of a number of countries, mostly in Asia and emerging markets, to have built reserves recently.
"Central bank activity is in part filling in for the tame retail physical buying from the likes of India of late by helping gold on the downside and inserting a price floor," UBS said in a note.
"In turn this has been providing investors with some comfort, that stronger hands are active sub $1,600, but importantly that their comfortable price entry is rising."
Among other precious metals, silver was down 0.7 percent at $27.20 an ounce, while spot platinum was down 1.5 percent at $1,387.25 an ounce and spot palladium was down 2.7 percent at $570.97 an ounce.
Platinum prices are still languishing near this year's lows, as expectations that demand will remain weak among European carmakers, key consumers of the autocatalyst metal, remained downbeat.
The metal has failed to respond this year to threats to supply from major producer South Africa.
Aquarius Platinum AQPJ.JAQP.L has reopened the Kwezi shaft at its Kroondal mine in South Africa, where operations were suspended after an attack at the site that left three dead and at least 20 injured, a spokeswoman said on Thursday.
The company said on Wednesday about 200 people, some of them armed, forced their way onto mine property. They are believed to be former employees of a mining contractor, who were dismissed following an illegal strike in June, it said.
Reporting by Jan Harvey; editing by Alison Birrane and Keiron Henderson