By Tatyana Shumsky
NEW YORK--Gold ended lower on Thursday as investors weighed the
impact of the European Central Bank's more accommodative policy
stance, while palladium posted its steepest gain in nearly three
months on escalating tensions between Russia and Ukraine.
Gold for December delivery, the most active contract, fell
$3.80, or 0.3%, to settle at $1,266.50 a troy ounce on the Comex
division of the New York Mercantile Exchange.
Gold prices spent the day meandering between slight gains and
losses as investors weighed the ECB's surprise decision to cut
interest rates in addition to announcing two bond purchasing
programs. The more aggressive policy move reflects that officials
have grown increasingly concerned over the recent period of very
low inflation and the threat it holds to the region's economic
recovery.
But for gold, the ECB's easing efforts are widely seen as a
mixed blessing. While gold can benefit from greater investment
demand as traders often seek hard assets as a hedge against
excessive monetary stimulus, the policy shift can also weaken the
euro and strengthen the dollar, making gold more expensive for
buyers who use other currencies.
On Thursday, the euro fell to $1.2920, its lowest level in
nearly 14 months, putting pressure on gold demand.
Still, the fact that gold's declines in dollar terms were
relatively small is a sign that the precious metal is holding its
own against the currency shifts and performing the function of a
store of value, said John Payne, senior market analyst with Daniels
Trading in Chicago.
"When the dollar goes up in value and gold stays relatively
flat, gold actually goes up in value in other currencies," Mr.
Payne said. "If you priced it in euros gold had a heck of a day,
it's appreciated, it just hasn't appreciated in U.S. dollars," he
added.
In euro terms, gold prices rose roughly 1.1% today.
Meanwhile, palladium prices rebounded off two-week lows touched
Wednesday as fresh tensions between Russia and Ukraine reanimated
worries about supply.
Russia's foreign minister said Thursday that Ukraine's ambitions
to join the North Atlantic Treaty Organization are endangering
attempts to reach a cease-fire between Kiev and pro-Russia
separatists in Eastern Europe. NATO's civilian head Anders Fogh
Rasmussen said Russian forces continue to destabilize Ukraine, even
as the sides are to hold talks Friday in the first steps toward the
peace process.
Some investors worry that Western trade sanctions against
Russia, the world's top producer of palladium, or retaliatory trade
curbs by the Kremlin will disrupt supply of the metal to the
market. Russia accounts for about 40% of global palladium supply,
and the majority of the metal is used by the automotive industry in
exhaust filters.
Palladium for December delivery, the most active contract, rose
$15.05, or 1.7%, to settle at $891.00 a troy ounce on the
Nymex.
Write to Tatyana Shumsky at tatyana.shumsky@wsj.com