GOLD PRICES fell to a 1-week low at $1122 per ounce in London trade Thursday as the US Dollar rose on the FX market following a cut to the European Central Bank's outlook for inflation and growth in its 330-million citizen currency zone.

 

Euro gold prices bounced €10 per ounce to recover last week's closing level of €1110 as the single currency fell.

 

With US jobs data due Friday, "Investors are just waiting on the sidelines to see what the Fed will decide" about raising US interest rates from 0% when it meets in a fortnight, Reuters quoted consultancy Capital Economics' analyst Simona Gambarini overnight.

 

Futures contracts on the Fed Funds rate now put the odds of a hike at this month's policy meeting at one-in-three.

 

"The probability of a September hike has ticked upwards from [last week's] low levels," notes Japanese conglomerate Mitsubishi's analyst Jonathan Butler, but "confusion" amongst Fed policymakers "serves to confirm that rates will remain lower for longer.

 

"Once an initial rise has been fully priced into gold and its sister metals, the complex stands to make some gains."

 

Expectations of a US Fed rate hike, combined with " concerns about the growth transition in China [and] an increase in risk aversion" mean that "downside risks to the outlook have risen," said the International Monetary Fund in a briefing note for G20 ministers and central bankers meeting in Ankara, Turkey tomorrow, cutting its 2015 global GDP growth forecast to 3.3% from the 4% forecast a year ago.

 

"Renewed downside risks have emerged to the outlook for growth and inflation," agreed European Central Bank president Mario Draghi today, holding ECB rates at record lows of 0.05% after today's policy vote in Frankfurt.

 

With 1 year left in the ECB's current €60 billion per month QE bond buying, "There was no discussion on changing size or pace of the purchase programme today," Draghi's team tweeted during his scheduled press conference.

 

Gold prices "edged sideways" in earlier Asian trade Thursday, says the dealing desk at Swiss refining and finance group MKS, "as the Chinese took their first day of a two-day holiday" to mark 70 years since China's victory over Japan.

 

"Leading into tomorrow's NFP release," says MKS of the US jobs data due Friday, "$1125 is an important support" for the gold price "if it is to break higher to test $1150."

 

Gold imports to No.2 gold-buying nation India are set to drop 10% in 2015 from last year thanks to weak monsoon rains and a poor harvest, reckons Ketan Shroff of trade body the India Bullion and Jewellers Association.

 

Silver bullion imports to India have so far jumped 50% against the first 8 months of 2014, note specialist analysts at Metals Focus, HQ'ed in London.

 

Silver held firmer than gold prices Thursday, before spiking 2.6% late afternoon in London to touch 1-week highs just shy of $15 per ounce.