Gold Falls, With Dollar Rising After ECB Statement

By Amrith Ramkumar and David Hodari Features Dow Jones Newswires

Gold prices fell Thursday, weighed down by a stronger dollar after European Central Bank officials unveiled plans to scale down but extend their quantitative easing program.

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Gold for December delivery closed down 0.7% at $1,269.60 a troy ounce on the Comex division of the New York Mercantile Exchange. A stronger dollar has helped keep prices below $1,300 for much of October, and a rising U.S. currency was hurting gold again Thursday.

The ECB said it would pare back its monthly bond purchases and keep buying until the end of September, with ECB President Mario Draghi noting that the bond-buying program could be extended. Mr. Draghi said the continued stimulus is needed if inflation is to rise to the ECB's target of just under 2%.

Those comments pushed the euro down against the dollar, which then weighed on gold prices because the dollar-denominated metal becomes more expensive for foreign buyers when the dollar rises. The WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 others, was recently up 0.7%.

The dollar rose further following the news that the House of Representatives adopted a budget that sets the stage for a rewrite of the U.S. tax system.

"A strong dollar is often a prelude to a weaker gold market," said Ira Epstein, a strategist at Linn & Associates, noting that it is a "very difficult time for the gold market" because of the dollar's recent strength.

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Amid speculation about the next Federal Reserve chair, investors will continue keeping a close eye on central-bank signals. Gold struggles to compete with yield-bearing assets like Treasurys when interest rates rise, and the Fed's commitment to its plan to gradually raise rates also has helped boost the dollar.

Mr. Epstein said he has clients in no metal positions because of the Fed's current outlook, easing geopolitical tensions and the lack of inflation. Some investors use gold as a hedge against higher consumer prices.

Among base metals, copper for December delivery fell 0.2% to $3.1775 a pound. The industrial metal sits near three-year highs, buoyed by global growth and a strong demand outlook from China, the world's largest consumer.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and David Hodari at David.Hodari@dowjones.com

(END) Dow Jones Newswires

October 26, 2017 15:00 ET (19:00 GMT)