Gold dropped below $1,300 an ounce on Friday, pulling back from five-month highs, as the dollar strengthened after the European Central Bank launched a multi-billion bond-buying programme to reinvigorate the euro zone economy.

The precious metal, seen as a hedge against inflation, jumped on Thursday after the ECB pledged to spend more than €1 trillion to revive growth and ward off deflation.

Gold has since pared some of those gains as the euro touched a fresh 11-year trough against the dollar and the metal found it tough to stay above the $1,300 psychological level.

“There are two forces at play. The first is technical in the sense that the $1,300 handle appears to be a very strong resistance to gold at this juncture,’’ said Barnabas Gan, analyst at OCBC Bank.

“The second is the fact that dollar has been firmer after the ECB’s move.’’

Spot gold

Spot gold was down 0.4 per cent at $1,296.40 an ounce by 0711 GMT, after hitting a session high of $1,302.50. Bullion peaked at $1,306.20 on Thursday, its highest since August 15, and was still headed for a third straight weekly gain.

The dollar rose 0.3 per cent against a basket of currencies, making dollar-denominated gold more expensive for holders of other currencies.

Euro-priced gold was trading at 1,142.63 euros an ounce, after rising as high as 1,150.47 euros overnight, its highest since April 2013.

ECB stimulus, Fed meet

The ECB’s stimulus plan along with expectations of higher US interest rates would translate to a firmer dollar this year and weigh on gold, said analyst Gan, who estimates the price of the metal would hit $1,000 by year-end.

Investors will be eyeing next week’s US Federal Reserve policy meeting for clues on the timing of the rate hike this year.

The Fed is expected to repeat that global risks have yet to throw the US recovery or their rate hike plans off track despite the swelling ranks of central banks cutting rates and ramping up stimulus.

Still, the global economic uncertainty as well as positive chart patterns should keep gold higher, with $1,320 and $1,350 both “achievable upside targets’’, said INTL FCStone analyst Edward Meir, who has a short-term bullish stance on gold.

Outside Europe, China is also facing a difficult year after its economy expanded at the slowest pace in 24 years in 2014. China’s manufacturing growth stalled for a second straight month in January and companies had to cut prices at a faster clip to win new business, a private survey showed.

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