Gold holds near four-month low as ECB move on rates awaited

Gold was little changed near a four-month low on Thursday but faced a risk of more losses if the European Central Bank (ECB) meets expectations to cut rates, a move that could strengthen the dollar and hurt bullion.

The ECB is poised to impose negative interest rates on its overnight depositors at its Thursday meeting, seeking to cajole banks into lending instead and to prevent the euro zone falling into Japan-like deflation.

A weaker euro and a stronger dollar would make the dollar-denominated gold more expensive for holders of other currencies.

Spot gold was flat at $1,243.06 an ounce by 0253 GMT. The metal is close to its four-month low of $1,240.61 hit earlier in the week.

"Technically, the trend for gold is very clear. It is heading downwards and is likely to test support level at $1,200," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

"Financial markets are quite bullish and investors are not risk averse as they expect US economic data to be strong."

To noted that while an ECB move to cut rates could theoretically support gold as a monetary easing measure, technical momentum and a stronger dollar could have a much bigger impact on prices.

The euro languished at four-month lows early on Thursday, while the dollar index held near a four-month peak hit earlier in the week.

Markets were also eyeing Friday's US nonfarm payrolls to gauge the strength of the economy. A weak report could burnish gold's safe-haven appeal.

In news on other precious metals, South Africa's new mining minister Ngoako Ramatlhodi said he hoped to resolve the strike in the platinum sector this week, and union AMCU was also optimistic the five-month stoppage that has crippled mine output could be nearing an end.

Platinum and palladium eased as an end to the strike would ease worries over tight supply.