LONDON  - Gold prices kept to very tight ranges on Friday, but underlying sentiment in bullion and the euro was weak after the European Central Bank highlighted downside risks to the region’s economy.
Gold was down 0.1 percent at $1,669.20 by 1305 GMT. U.S. gold futures for April delivery were also slightly lower at $1,670 an ounce. Spot silver rose 0.2 percent to $31.50 an ounce.
Gold briefly reacted to euro weakness on Thursday, dropping nearly 1 percent before rebounding above $1,680 an ounce, as ECB chief Mario Draghi said at a news conference that the central bank would maintain an accommodative monetary policy and highlighted downside risks to the economy.
But analysts do not expect significant price increases in gold as signs of global economic recovery continue and the euro comes off a recent rally after Draghi’s more cautious stance on the currency.
“Investor risk appetite will keep gold in check ... and trade will be very much euro-driven after Draghi’s comments,” Commerzbank analyst Eugen Weinberg said. “Prices struggle to find the catalyst for a rally as there is still a general feeling that the euro zone crisis is tailing off, the global economy is recovering and demand for safe havens is not there.”
Chinese export and import data released earlier showed a surge in January, pointing to robust domestic demand and a pickup in the economy not solely explained by the timing of the Lunar New Year holiday, which begins this weekend.
Gold was also weighed down by the lack of inflationary pressures in Europe, China, the United States and other major markets, analysts said.
“Inflation, the other driving factor for gold, is not seen as a threat for the time being, and investors look mostly at risky assets like equities or even more industrial metals like platinum and palladium, which are more in focus than gold at the moment,” Weinberg said.
On the upside, the SPDR Gold Trust, gold’s largest exchange-traded fund (ETF), saw its first inflow since mid-January in the previous session, rising a modest 1.8 tonnes. Its holdings are down nearly 21 tonnes this year, compared with a rise of 22.6 tonnes in the same period of 2012.
Holdings in the iShares Silver Trust were up 25.6 tonnes on Thursday, bringing its total inflow for the week to 67.86 tonnes. So far this year, its holdings were up 361.42 tonnes.
Platinum and palladium extended losses, after having rallied to their highest levels for more than a year and a half earlier this week, as speculative investors started to take profits.
Spot platinum fell 0.2 percent to $1,711.99 an ounce, having risen as high as $1,740 earlier this week.
Palladium was down 0.8 percent at $742.27. It touched its highest since September 2011 at $769.50 an ounce on Wednesday.
“Both platinum and palladium would do well from a short-term spec cleanout after net length extended aggressively over the last few weeks,” UBS analyst Joni Teves said.
“Further downside may be in store up ahead as net speculative positions are reduced, but the weakness should be viewed as a buying opportunity.”
However, fundamentals remain strong for platinum group metals, used in auto catalysts and jewellery, due to a more positive economic outlook and mining disruptions in South Africa, as well as a drop in palladium output from Russia.