Gold holds near $1,535 ahead of ECB meeting

Gold held near $1,535 an ounce in Europe yesterday, little changed from the previous session, as traders took to the sidelines ahead of the European Central Bank meeting. Spot gold was bid at $1,535.70 an ounce at 1122 GMT, against $1,536.80 late in New York on Wednesday. US gold futures for August delivery fell $1.90 to $1,536.80. The ECB is expected to leave interest rates on hold for the time being but to indicate a rise is on the way in July. It is unlikely to unveil significant detail of a new bailout package for heavily-indebted Greece, analysts said. "Uncertainty relating to concerns about Greece and the deceleration of economic growth has increased recently," said BNP Paribas analyst Anne-Laure Tremblay. "Nevertheless, we expect the ECB press conference to signal a 25 basis point hike at the July meeting, supported by upward revisions to [2011] inflation and growth projections." Expectations that Eurozone interest rates will climb faster than those in the United States supported the euro, which rose 0.25 per cent versus the dollar in early trade, reversing the previous session's losses. Sluggish US economic data has boosted expecations that US interest rates will stay at record lows, pressuring the dollar and weighing on benchmark Treasury yields. The end of the second round of quantitative easing measures in the US this month could lead growth to stall once more. Dollar weakness tends to lift gold prices, as it makes dollar-priced assets cheaper for other currency holders and boosts the precious metal's appeal as an alternative investment. In the medium term, ongoing concern over the financial health of the Eurozone is set to support interest in gold as a haven from risk. Greek bond yields rose yesterday after European officials said more steps were needed to meet deficit cutting targets, with no clarity over how policymakers intend to resolve the country's debt problems. The EU, ECB and IMF mission to Greece said in a report obtained by Reuters on Wednesday that more aid for Greece could not be released until it corrected the under-financing in its adjustment programme. These simmering concerns could shake gold out of its current summer lull, analysts said.