Gold nudges six-month highs after ECB unveils bond plan

Gold rose to six-month highs on Thursday after the European Central Bank offered enough detail of its proposed bond-buying programme to protect the euro from a deep sell-off.

ECB President Mario Draghi said the bank agreed to launch a new and potentially unlimited bond-buying programme to lower struggling euro zone countries' borrowing costs and draw a line under the debt crisis.

Gold tends to benefit from an environment of low interest rates and any resulting strength in the euro against the U.S. dollar could further fuel the rally, although gains may be limited by anticipation ahead of a key gauge of U.S. employment on Friday.

Spot gold rose 0.5 percent to $1,701.04 an ounce by 1350 GMT, having risen to a session peak at $1,713.79, its highest since March.

Gold priced in euros showed a 0.7 percent gain on the day, rising to 1,352.96 euros an ounce, having hit a fresh peak for 2012 of 1,355.98 euros earlier, its highest since September 12 last year, the day the price hit a record 1,373.92 euros.

"Gold is holding because the market has been given what it was hoping for, but in order for gold to move decisively higher from here, we need to see what numbers the U.S. will bring to the table," Ole Hansen, senior manager at Saxo Bank, said.

"The longer we stay above $1,700, the better. It gives all the newly-established long positions a bit of confidence," he added.

The ECB, which left the euro zone benchmark rate at 0.75 percent, said the plan was aimed at the secondary market to address bond market distortions and "unfounded" fears of investors about the survival of the euro.

The scheme, which the Bundesbank is known to have opposed, would focus on bonds maturing within three years and was strictly within the ECB's mandate, Draghi said.

Yields on the sovereign bonds of Italy and Spain, the euro zone's third and fourth largest economies, have been driven to their highest this year since the launch of the single European currency by investor unease over their public finances.

The ECB's programme, which does not imply an increase in the central bank's balance sheet or money supply, may not have the same impact on gold as a similar step by the U.S. Federal Reserve, analysts said.

"Although gold could benefit from a strengthening of the euro versus the dollar and a general appreciation of risky assets, it would be wrong to view Draghi's plan as a form of QE, and as such it may not offer much of a boost to gold prices," Natixis said in a note.

Doubt over QE

The practice of a central bank buying sovereign bonds to suppress interest rates and freeing up credit by adding money supply, known as quantitative easing, has been one of the key drivers behind the doubling in value of gold since 2008.

The Fed, which has indicated it could resume quantitative easing if recent data suggest the economy would benefit from it, meets next week to discuss policy and Friday's unemployment report could be a decisive factor.

A Reuters survey offers a forecast for an increase of 125,000 works on non-farm payrolls.

Elsewhere, platinum rose to a new five-month high, swept higher by a broad investor push into precious metals, while world number three producer Lonmin and several South African unions signed a peace deal aimed at ending a deadly three-week strike.

Lonmin and unions representing mineworkers at the strike-hit Marikana platinum mine in South Africa have signed an accord for a return to work, but a militant breakaway union was not part of the deal, union officials said on Thursday.

On Wednesday, more than 3,000 striking miners marched through streets near the mine, the largest protest at the hot spot since police shot dead 34 of their colleagues last month.

In that time, platinum has gained more than 15 percent in value and now shows a gain for 2012 of 14 percent. On Thursday, the price was up by 1.0 percent at $1,580.24 an ounce, while palladium was up 0.8 percent at $645.22 an ounce.

Silver, which has gained nearly 4 percent since the start August, was up by 0.9 percent on the day around 5-1/2 month highs at $32.54 an ounce.

The gold/silver ratio, or the number of ounces of silver needed to buy one ounce of gold, fell below 52.0, its lowest since late April, highlighting silver's outperformance against gold. The ratio was closer to 60.0 just a month ago.