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Gold may go up on the continent if the ECB doesn’t act

The gold price has reached a near year high despite stock markets recovering, hitting $1357.17 in the early hours of this morning on the back of continuing geopolitical tensions and the weather storms hitting the US. It marks an increase of more than 1% compared to Wednesday’s closing price, and is up 17.6%, or $200, since the year began.

However, gold slipped in euro terms after the European Central bank (ECB) decided not to taper off its €60bn a month bond-buying scheme nor change interest rates. The decision has been delayed until Autumn, but monetary policy on the continent looks to require a certain level of nuance by president Mario Draghi: “[He] did his best not to sound too hawkish as the zero-interest-rate policy of the ECB relies very much on the cooperation of financials markets,”  said David Kohl, Chief Currency Strategist at Julius Baer in a press release. “Draghi acknowledged in quite a blunt manner that the stronger euro is tightening monetary conditions in the Eurozone, but refrained from committing himself as to whether this tightening is already too much for his taste.”

“We expect the euro to weaken again in three months’ time largely because of its interest-rate and yield disadvantage. Interestingly, bond yields in Europe fell although the end of QE is near. This strengthens our argument for a weaker euro going forward”. A weak euro would bode well for domestic gold holders on the continent as the price usually has an inverse relationship to the value of the currency, and a low interest environment holding down the value of the euro makes commodities such as gold more attractive in the short term.

The Bank of Canada took a different decision yesterday, opting to raise its key interest rate for the second time in two months. It now stands at 1% on the back of 4.5% GDP growth in the second quarter.

Bitcoin is also in the news for yet another price milestone: The CoinDesk Bitcoin Price Index (BPI) hit a high of $5,013.91 last saturday. Bitcoin cash, a spin-off created in the “hard fork” last August, yesterday reached a new high of $718, up 8%. The new form of bitcoin led a large cryptocurrency rally on Wednesday, having suffered a crash earlier in the week after a crackdown by financial regulators.

Photo credit: ollo

Link to this article: : http://www.goldmadesimplenews.com/gold/gold-may-go-up-on-the-continent-if-the-ecb-doesnt-act-13390/

Posted by on Sep 8 2017. Filed under Gold News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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