PRECIOUS-Gold climbs in line with euro, stocks

Gold 

* Hopes for ECB action on debt crisis boost euro, stocks
*Indian demand soft ahead of festival season
* Gold-backed ETFs see inflows after lacklustre July 

LONDON, Aug 7 (Reuters) - Gold prices firmed on Tuesday, lifted by a recovery in the euro versus the dollar and a rise in stock markets as optimism grew that the European Central Bank will act to lower borrowing costs for Spain and Italy. Safe-haven German Bund futures extended losses as appetite for assets seen as higher risk picked up. The euro climbed back towards a one-month high against the dollar, while European stocks pared early losses to swing higher.



[FRX/] [.EU] Spot gold <XAU=> was up 0.1 percent at $1,611.40 an ounce at 1431 GMT, while U.S. gold futures <GCv1> for August delivery were down $2.20 an ounce at $1,614.00. "In the immediate term, it's all about the euro, which is currently very close to a one-month high," Sharps Pixley Chief Executive Ross Norman said. "There's a degree of optimism in the markets at the moment on possible stimulus. "We had a bit of an updraft from the euro, while at the back of our minds we have concerns over demand destruction in key centres like India," he added. "But broadly speaking, the market seems to be in the summer doldrums, lacking conviction on the moves higher."

Gold bulls are hoping the U.S. Federal Reserve will launch another round of quantitative easing later this year to boost growth, which would hurt the dollar while keeping long-term interest rates at rock bottom and stoking inflation fears.

Disappointment that the Fed did not give any clear clues on the timing of QE combined with disappointment that ECB President Mario Draghi did not unveil another round of bond-buying pushed gold prices lower last week. But although Draghi's guidance on fresh ECB action was heavy with caveats and conditions, he opened the door to a new round of policy action that could even involve quantitative easing - a bold step the ECB has so far shunned.

"Draghi ... reiterated that the ECB was ready to engage in 'non-standard' measures, potentially involving open market operations," VTB Capital said in a note. "Global risk sentiment turned bullish on high expectations for stimulus in the monetary union.
By Jan Harvey - 07 Ago 2012 - 15:44 - Reuters