* ECB leaves rates on hold as expected; Draghi remarks eyed
* Dollar rises after bold Bank of Japan easing
* European stocks recover after Spanish bond auction
(Updates throughout, changes dateline from SINGAPORE)
By Clara Denina
LONDON, April 4 Gold hit a 10-month trough below
$1,540 an ounce on Thursday as the dollar strengthened ahead of
a statement by European Central Bank chief Mario Draghi, after
the bank left rates on hold as expected at its latest policy
The statement will be closely watched for clues on monetary
policy. Gold, which benefits from loose monetary policy, earlier
failed to capitalise on surprisingly strong easing steps by the
Bank of Japan.
Spot gold fell as low as $1,539.74 an ounce, its
lowest since May 30, and stood at $1,546.90 by 1200 GMT, down
0.7 percent. On the charts, the next downside target stands at
the May low of $1,527, traders said.
U.S. gold for June delivery fell 0.4 percent to
"Gold is suffering from dollar strength ahead of the ECB,
which is unlikely to deliver any surprise again today," VTB
Capital analyst Andrey Kryuchenkov said.
"At this point it's all about sentiment and if bailout talks
in Cyprus, tensions in North Korea and BoJ monetary easing have
not triggered buying it is difficult that we will see a
turnaround in prices any time soon."
The dollar strengthened against the euro after euro zone
services PMI data showed continued contraction in the sector in
March, heaping more focus on the ECB.
Draghi's statement will be closely watched for any signals
about the bank's preparedness to lower borrowing costs for the
17-country euro zone in the coming months.
The U.S. currency also gained against the yen after the Bank
of Japan announced aggressive measures to ease monetary policy,
including a plan to double its holdings of bonds and stocks in
"Further easing from the BOJ should ultimately be positive
for gold, but for now seems unable to match the combination of
poor sentiment and a firmer dollar," UBS said in a note.
EUROPEAN SHARES STEADY
On the wider markets, European shares pared gains after the
ECB left rates on hold. Markets particpants will monitor
Friday's release of U.S. payrolls data for March, which will
give the clearest assessment of the U.S. jobs market.
Signs of economic improvement could prompt the U.S. Federal
Reserve to halt its bullion-friendly bond-buying programme
earlier than expected.
There was further liquidation of gold-backed ETFs on
Wednesday, with holdings of the largest, New York's SPDR Gold
fund declining another 2.71 tonnes after the previous
session's 8.1-tonne outflow.
Physical demand was stronger in Asia after the metal fell
and as North Korea moved what appears to be a mid-range missile
to its east coast, according to South Korea's Yonhap news
Tokyo gold futures declined as much as 2.1 percent
before paring some losses as the weaker prices ignited buying
from speculators in Japan. Premiums for gold bars in Tokyo edged
up to 50 cents an ounce to spot London prices from zero earlier
Those precious metals more widely used in industry came
under pressure, also due to weak economic data in the United
Silver tumbled to its lowest level since July 24 at
$26.65 an ounce and was later at $26.82, down 0.3 percent.
Platinum dropped to its lowest since late August at
$1,504.50. It was later at $1,521.49, down 0.7 percent, while
palladium was down 1.8 percent at $736.50.
(Editing by Helen Massy-Beresford and Keiron Henderson)