Gold hit its all-time high of Rs 32,758 per ten grams ahead of stong global cues ahead of the ECB meeting where the new bond-buying plans that could help contain the debt crisis will be announced.
But many investors are likely to turn their attention to US non-farm payrolls data due on Friday, with a weaker-than-expected number likely to bolster expectation of more quantitative easing by the Federal Reserve, probably later this month.
“There’s a lot of event risk in the market at the moment. People seem to be positioning for a relatively positive outcome from the ECB, and that’s probably why we are testing $1,700 right now,” said Nick Trevethan, senior metals strategist at ANZ in Singapore.
“If they come up with a clear and relatively detailed policy framework, we could see gold up another $10 or $15, or maybe more. If they are less clear than the market hopes, then prices could fall back. We see support around the $1,676 level.”
Other precious metals rose as gold rallied, with silver and platinum rising to their strongest levels since April. US Fed Chairman Ben Bernanke’s comment on the grave condition of the US labour market last week had prompted investors to buy gold as a hedge against inflation.
Sources told Reuters that the ECB was ready to waive seniority status on government bonds it buys under a new programme, which it is set to agree upon at Thursday’s Governing Council meeting.
“I think (the ECB) is going to buy sovereign bonds. But the market is a bit overbought already. Everyone is betting the QE3 is coming. I think the downside is limited even though a correction is coming,” said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
“It’s all very quiet in the physical market,” said Leung, adding that gold was likely to find support at $1,670-$1,680.
Gold, typically a safe-haven asset, has often tracked the fortunes of the euro and stocks, with speculators selling the metal for cash to cover losses in other markets as the eurozone debt crisis caused turbulence in financial markets.
The metal has risen on talk that the ECB will launch a programme of purchasing Italian and Spanish bonds, with other steps aimed at lowering borrowing costs for debt-saddled countries.
Stocks edged higher on Thursday and the euro held on to the previous session’s gains on hopes that the ECB would unveil new tactics to curb surging borrowing costs in indebted eurozone states.
But thin trading suggested that some gold investors had expected the ECB to announce the new buying programme, while selling persisted in the physical market ahead of the payrolls data and as bullion prices held near highs.
The first two rounds of US quantitative easing have lifted gold prices, which have doubled in the last four years. The Fed’s next policy meeting is scheduled for next week, but the US jobs report on Friday could affect the decision.
“Physical selling is still there, and Thailand is the most active seller,” said a physical dealer in Singapore. “We are also seeing gold bars coming from Indonesia.”