Gold Ends Modestly Higher After ECB's Massive Stimulus Plan

(RTTNews) - Gold futures rebounded to end modestly higher on Thursday, after the European Central Bank announced a massive monetary stimulus package that was larger than market expectations.

Any monetary stimulus is bullish for gold and quantitative easing is usually associated with devaluing a country's currency since it is similar to printing money.

With the dollar surging to fresh 9-year highs versus the euro, the gains made by the precious metal were somewhat limited.

The ECB announced the launch of an "expanded asset purchase program" with combined monthly purchases of 60 billion euros or $70 billion, through at least the end of September 2016. ECB President Mario Draghi said the stimulus package will help push inflation back toward 2 percent in late 2015.

The ECB kept its main interest rate unchanged on Thursday, with the main refinancing rate at 0.05 percent, and the rate on its marginal lending facility at 0.30 percent.

The precious metal's uptick was also impacted after some upbeat economic data with first-time claims for unemployment benefits in the U.S. dropped more than what analysts expected.

Gold for February delivery, the most actively traded contract, gained $7.00 or 0.5 percent, to settle at $1,300.70 an ounce on the Comex division of the New York Mercantile Exchange on Thursday.

Gold for February delivery scaled an intraday high of $1,307.80 and a low of $1,279.10 an ounce.

On Wednesday, gold snapped seven days of straight gains to end a shade lower at $1,293.70 an ounce, down $0.50,

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped to 740.45 tons on Thursday, from its previous close of 742.24 tons on Wednesday.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 94.12 on Thursday, up sharply from its previous close of 92.71 late Wednesday in North American trade. The dollar scaled a high of 94.18 intraday and a low of 92.48.

The euro trended sharply lower against the dollar at $1.1379 on Thursday, as compared to its previous close of $1.1611 late Wednesday in North American trade. The euro scaled a high of $1.1647 intraday and a low of $1.1365.

On the economic front, a report from the Labor Department on Thursday showed a modest drop in first-time claims for U.S. unemployment benefits in the week ended January 17, with claims coming in above economists' estimates. Initial jobless claims dropped to 307,000, a decline of 10,000 from the previous week's revised level of 317,000. Economists had expected jobless claims to slide to 300,000 from the 316,000 originally reported for the previous week.

From Europe, the U.K. budget deficit increased in December from last year, the Office for National Statistics said Thursday. Public sector net borrowing excluding public sector banks totaled GBP 13.1 billion, an increase of GBP 2.9 billion or 27.8 percent from last year. The deficit was forecast to fall to GBP 9.7 billion.

The eurozone government debt to gross domestic product ratio declined in the third quarter, Eurostat reported Thursday. At the end of the third quarter of 2014, government debt to GDP came in at 92.1 percent versus 92.7 percent in the second quarter. In the same period of last year, the ratio was at 91.1 percent.

The Bank of Japan in an assessment indicated the Japanese economy to be recovering at a moderate pace, but inflation is likely to slow, the Monthly Report on Recent Economic and Financial Developments revealed Thursday. Japan's economy has continued to recover moderately as a trend as the effects of the decline in demand following the sales tax hike have been waning on the whole, the central bank said.