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PRECIOUS-Gold rebounds from 2010 lows after ECB rate decision

Published 04/12/2015, 07:28 am
© Reuters.  PRECIOUS-Gold rebounds from 2010 lows after ECB rate decision
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* ECB cuts deposit rate to -0.30 percent

* SPDR Gold Trust sees biggest outflow since 2011

* Silver, platinum bounce back from multi-year lows (Updates prices; adds comment, second byline, NEW YORK dateline)

By Marcy Nicholson and Jan Harvey

NEW YORK/LONDON, Dec 3 (Reuters) - Gold bounced from near six-year lows on Thursday in line with a sharp rebound in the euro, rising 1 percent after the European Central Bank (ECB) announced the minimum cut in its deposit rate that investors had been expecting.

The ECB cut its deposit rate to -0.30 percent from -0.20 percent, but left its main refinancing rate, which determines the cost of borrowing for banks at the ECB's weekly auction, unchanged at 0.05. ID:nL8N13S2V9

The cut was smaller than some traders had expected, leading to a 3 percent rebound in the euro EUR= against the dollar.

"Every article I read and everyone I spoke to (ahead of the announcement) was thinking of a rate cut," said Afshin Nabavi, head of trading at MKS.

"When they left (the main refinancing) rate unchanged, the market was rather shocked."

Spot gold XAU= was up 1.1 percent at $1,064.71 per ounce at 3:22 p.m. EST (2022 GMT), after falling to its lowest since February 2010 at $1,045.85 an ounce. Earlier weakness came from Federal Reserve Chair Janet Yellen's comment on Wednesday that shored up expectations for a U.S. rate hike this month. urn:newsml:reuters.com:*:nL1N13R2ZJ

A hike at the Dec. 15-16 policy meeting would be the first in nearly a decade. Rising rates tend to weigh on gold, as they lift the opportunity cost of holding non-interest paying assets.

U.S. gold futures GCv1 for February delivery settled up 0.7 percent at $1,061.20.

"I would attribute most of the rally to the weakness in the U.S. dollar," said Bill O'Neill, co-founder of commodities investment firm Logic Advisors in New Jersey, adding that he did not expect the session's short-covering rally to "have legs".

U.S. nonfarm payrolls data on Friday will be keenly watched for more clues on the direction of U.S. monetary policy.

"(If) the labor market report tomorrow isn't as strong as expected, (we could see) some short covering in gold futures," Julius Baer analyst Carsten Menke said. "However, that does not change the longer term picture at all, that we are just in an environment where gold is not attractive."

The world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares GLD fell 2.41 percent to 639.02 tonnes on Wednesday, the lowest since September 2008 and biggest single-day percentage drop in four years.

Silver XAG= was up 0.7 percent to $14.12, after hitting its lowest since August 2009 at $13.79 an ounce. Platinum XPT= was up 1.3 percent at $841.49 an ounce, after touching a seven-year low of $819.75, while palladium XPD= was up 2.5 percent at $537.61 an ounce after touching a three-month low at $521.72.

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