July 20, 2017 / 10:09 AM / a year ago

PRECIOUS-Gold retreats as dollar ticks up ahead of ECB meeting

    * ECB expected to lay groundwork for shift away from
    * SPDR Gold Trust holdings fall to lowest since early Feb
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Updates throughout)
    By Jan Harvey
    LONDON, July 20 (Reuters) - Gold eased on Thursday as the
dollar firmed ahead of a European Central Bank meeting which
will be watched for signs of officials moving away from an
ultra-loose monetary policy.  
    The ECB is expected to lay the groundwork for an autumn
policy shift when it meets, after ECB chief Mario Draghi opened
the door to tweaks in a speech in Portugal last month.
    The spot gold price        was down 0.2 percent at $1,238.04
an ounce at 1048 GMT, while U.S. gold futures         for August
delivery were 0.4 percent lower to $1,237.40 an ounce.
    The euro was down 0.1 percent against the dollar before the
policy decision, but hovered close to a recent a 14-month high. 
  A stronger dollar tends to pressure assets priced in the U.S.
    "It has been currency swings and rate swings which have been
driving gold as of late," Julius Baer analyst Carsten Menke
said. "You still have speculation in the market that the ECB may
shift to a less expansionary policy earlier than expected. We
tend to disagree."
    "We think the potential for disappointment at the meeting
today is bigger than the potential for a positive surprise, so
this is rather something we see as gold negative from the
currency side."
     Tighter monetary policy in the euro zone could be seen as
either positive or negative for gold, depending on whether the
market responds more favourably to a stronger euro, or less
favourably to a rise in the opportunity cost of holding the
non-yielding metal.
    The ultra-loose policy in place since the last decade's
global financial crisis has been a key factor supporting gold
prices in recent years. 
    With the end to that unprecedented stimulus now within
sight, financial investors are nervously trying to gauge how big
central banks around the globe will unwind unconventional policy
that have kept borrowing costs ultra low.
     Holdings of the world's largest gold-backed exchange-traded
fund, SPDR Gold Shares      , fell 5.3 tonnes on Wednesday to
816.1 tonnes, their lowest since early February. Its reserves
have declined more than 12 tonnes so far this week.
    "Investors remained cautious heading into today's ECB
meeting," ANZ said in a note.
    In other precious metals, silver        was down 0.4 percent
to $16.17 an ounce after touching its highest in over two weeks
at $16.36 in the previous session.
    Platinum        was 0.2 percent lower at $916.60 an ounce,
while palladium        was down 0.3 percent at $853.50 an ounce.
It hit a three-week high of $872.25 an ounce on Wednesday.

 (Reporting by Jan Harvey; additional reporing by Nithin Prasad
and Arpan Varghese in Bengaluru; Editing by Elaine Hardcastle)
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