Gold falls below $1,600 per oz after ECB disappoints
By Jan Harvey
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. Continued...