Gold rebounds from 2010 lows on dollar after ECB rate decision

By Clara Denina

LONDON (Reuters) - Gold steadied above an earlier near-six-year low on Thursday, as the dollar reversed gains versus the euro after the European Central Bank cut its deposit rate less than expected.

The ECB cut its deposit facility to -0.30 percent from -0.20 percent, a move designed to stimulate lending by increasing the penalty on banks that leave their excess cash with the central bank.

The ECB's main refinancing rate, which determines the cost of borrowing for banks at the ECB's weekly auction, was left unchanged at 0.05.

Spot gold rose 0.3 percent to $1,056.90 by 1312 GMT, rebounding from a lowest point since February 2010 touched in earlier trade at $1,045.85 an ounce.

The euro rose 0.7 versus the dollar after the rate decision.

The dollar also lost upward traction against a basket of leading currencies, retreating from a 12 1/2-year high hit on Wednesday, when Federal Reserve chair Janet Yellen hinted at a U.S. rate hike later this month.

"The next two weeks will be all about the U.S. rate 'liftoff', which is so widely expected," ActivTrades chief analyst Carlo Alberto de Casa said.

Yellen said on Wednesday she was "looking forward" to an interest rate rise that will be seen as a testament to the U.S. economy's recovery from recession.

She expressed confidence in the U.S. economy, saying job growth through October suggested the labour market was healing even if not yet at full strength.

A rate hike at the Dec. 15-16 policy meeting would be the first in nearly a decade. The opportunity cost of holding gold, a non-interest-paying asset, would rise.

"Gold is likely to remain fragile and vulnerable to the downside as investor sentiment is clearly negative," HSBC said in a note.

U.S. nonfarm payrolls data on Friday will be keenly watched for more clues.

Investors are rapidly pulling out of bullion funds, adding to pressure on the metal.

Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell 2.41 percent to 639.02 tonnes on Wednesday, the lowest since September 2008. The outflow is the biggest single-day percentage drop in four years.

Silver rose 0.9 percent to $14.10, after reaching its lowest point since August 2009 at $13.79 an ounce. Platinum gained 1.2 percent to $841.96 an ounce, after touching a seven-year low of $819.75, and palladium rose 1 percent to $530.40 an ounce.

(Additional reporting by Jan Harvey in London and A. Ananthalakshmi in Singapore; Editing by Mark Heinrich)