Gold up on ECB Interest Rate Decision, Physical Buying

Gold rose Thursday, rebounding from a 3 percent plunge the day before as bullion buyers made significant purchases and a decision by Europe's central bank to hold interest rates steady weakened the euro.

Traders interpreted the ECB action, which was widely anticipated, as indicating that Europe's central bank has ended its five-month-old tightening policy and begun a strategy of flattening or lowering interest rates.

European stocks retreated after the ECB announcement while U.S. stock market futures indicated a flat opening.

Wednesday's big drop in gold's price stemmed from two things, a German court's decision that freed up Europe's strongest economy to help bail out the continent's weakest economies and also hope that the U.S. central bank will once again take action to stimulate the economy.

However, the influence of such factors is measured in hours, not days or weeks, analysts said.

In the medium term to long term, it's pretty clear that the bullish trend hasn't been tarnished a bit, Pradeep Unni, senior analyst at Richcomm Global Services, told Reuters. We take yesterday's slide as correction which is good for the overall bullish market.

Gold on the U.S. futures market rose $40.20 to $1,857.80, a more than 2 percent gain.

Gold for immediate delivery climbed $40.70 to $1,857.51.