LONDON/NEW YORK (Reuters) - Spot gold was higher on Thursday on news of the European Central Bank’s plans for a potentially unlimited bond-buying program although positive U.S. economic data tempered bullion’s gains.
While holding just above the key $1,700 an ounce mark, bullion was knocked off six-month highs by jobs data that signaled a tentative improvement in the U.S. labor market.
Payrolls processor ADP said the U.S. private sector in August added the most jobs since March and a separate report from the government showed jobless claims fell last week.
Signs of a stronger economy could weaken the case for a third round of quantitative easing by the Federal Reserve and derail the rally that has pushed gold up 8 percent since mid-August.
But investors await the more widely watched August non-farm payrolls data due out on Friday, hoping for further insight on the health of the U.S. economy.
Spot gold was up 0.51 percent at $1,701.50 an ounce at 4:14 p.m. EDT (2014 GMT), while the U.S. December gold contract settled 0.70 percent higher at $1,705.60.
Bullion spiked to $1,713.79, its highest since early March, as the euro rallied after ECB President Mario Draghi outlined plans for a potentially unlimited bond buying program aimed at lowering struggling euro countries’ borrowing costs and resolving the euro-zone’s four-year debt crisis.
Gold tends to benefit from an environment of low interest rates and any resulting strength in the euro against the U.S. dollar could further fuel the rally, although gains may be limited by anticipation ahead of a key gauge of U.S. employment on Friday.
“Gold is holding because the market has been given what it was hoping for, but in order for gold to move decisively higher from here, we need to see what numbers the U.S. will bring to the table,” Ole Hansen, senior manager at Saxo Bank, said.
“The longer we stay above $1,700, the better. It gives all the newly established long positions a bit of confidence,” he added.
The ECB’s program, which does not imply an increase in the central bank’s balance sheet or money supply, may not have the same impact on gold as a similar step by the U.S. Federal Reserve, analysts said.
“Although gold could benefit from a strengthening of the euro versus the dollar and a general appreciation of risky assets, it would be wrong to view Draghi’s plan as a form of QE, and as such it may not offer much of a boost to gold prices,” Natixis said in a note.
Silver extended its six-week rally, hitting a fresh five-month high of $32.98 per ounce even as the industrial metal remained firmly in overbought territory measured by the Relative Strength Index (RSI).
Hitting resistance as it approached $33, prices eased back and were up 1.36 percent at $32.69 an ounce by late afternoon.
Chart watchers see support for silver at $30 per ounce after it broke above a downward trend line last week.
The practice of a central bank buying sovereign bonds to suppress interest rates and freeing up credit by adding money supply, known as quantitative easing, has been one of the key drivers behind the doubling in value of gold since 2008.
The Fed, which has indicated it could resume quantitative easing if recent data suggest the economy would benefit from it, meets next week to discuss policy and Friday’s unemployment report could be a decisive factor.
A Reuters survey offers a forecast for an increase of 125,000 workers on non-farm payrolls.
Elsewhere, platinum rose to a new five-month high, swept higher by a broad investor push into precious metals, while world number three producer Lonmin LMI.L and several South African unions signed a peace deal aimed at ending a deadly three-week strike.
Lonmin and unions representing mineworkers at the strike-hit Marikana platinum mine in South Africa have signed an accord for a return to work, but a militant breakaway union was not part of the deal, union officials said on Thursday.
Platinum was up by 1.0 percent at $1,580.49 an ounce, while palladium was up 0.33 percent at $642.10 an ounce.
Editing by Alison Birrane, Jason Neely and Phil Berlowitz