Gold erases weekly gain as prices drop after ECB decision

Gold prices suffered a sharp decline on Thursday, erasing a gain for the week as the euro weakened, providing support for the dollar, in the wake of the European Central Banks monetary-policy meeting.

The yellow metal failed to find support from former Federal Bureau of Investigation boss James Comeys testimony before a Senate panel amid an investigation into alleged Russian efforts to interfere in last years presidential race. Investors are also awaiting the outcome of the U.K.s snap general election.

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August gold GCQ7, -0.12% fell $13.70, or 1.1%, to settle at $1,279.50 an ouncethe lowest finish in a week. Thursdays loss erased what would have been a gain for the week. Prices have now lost 70 cents week to date.

The ECB Thursday stood pat on its monetary policy. However, it tweaked the so-called forward guidance in its policy statement, leaving the impression that it may be inclined to reduce its accommodative posture by lifting interest rates or scaling back its bond-buying program in the near futureall factors that could prove bearish for metals, which tend to perform better in an atmosphere of low rates.

Gold lost one of its last underpinnings today with the ECB shifting its stance and saying no more rate cuts are likelya shift to somewhat tighter monetary policy, said Rob Haworth, senior investment strategist at U.S. Bancorp Wealth Management. The ECB now joins the Fed as major central banks who are moving awa y from policy, causing a further headwind for gold.

Gold remained lower as the euro EURUSD, -0.2318% eased and the dollar gained after the ECB news.

The ICE U.S. Dollar Index DXY, +0.16% which tracks the buck against a basket of six rivals, was up 0.2%. Strength in the dollar can make gold and other commodities pegged to the currency more expensive to buyers using other monetary units, presumably lowering their demand.

Meanwhile, prices for gold continued to decline as Comey testified before a Senate panel.

The Comey testimony didnt have a material effect on gold trading as real interest rates remain the primary influence on the market right now, said Tyler Richey, co-editor of the Sevens Report.

Traders are expecting a 99.6% probability of a U.S. interest rate increase in June, CME Groups FedWatch showed.

Haven commodities have drawn bids amid the rising geopolitical jitters. Prices for gold, which tends to garner buying during times of uncertainty, settled at a seven-month high Tuesdayand a number of other so-called haven assets lured investors.

Julian Phillips, co- founder of Gold Forecaster, said the latest declines in gold is consistent with the technical pattern it has established in the last few weeks.

Prices may fall to $1,250 without breaking the positive pattern or new trend, as they are still trading above the Golden Cross at $1,250, which is when the 50-day average rises through the 200-day average, he said.

Meanwhile, July silver SIN7, -0.28% fell 20.6 cents, or 1.2%, at $17.414 an ounce in Thursday trading, while July copper HGN7, -0.29% ended at $2.610 a pound, up 5.8 cents, or 2.3%.

Read: Copper prices rally as weather, labor issues hit

July platinum PLN7, -0.04% fell $9.50, or 1%, to $938.10 an ounce, but September palladium PAU7, +0.28% added $18.30, or 2.2%, to $846.50 an ounce.

In exchange-traded funds, the SPDR Gold Trust GLD, -0.65% fell 0.8%, the VanEck Vectors Gold Miners ETF GDX, -1.82% was down 2%, while the iShares Silver Trust SLV, -0.96% retreated by 0.9%.