ECB Does Not Give Up…Neither Does Gold

Investment Advisor & Author @ Sunshine Profits
January 22, 2016

gold coinYesterday, there was a meeting of the European Central Bank. Will it affect the gold market?

The January ECB Meeting is behind us. As expected, the Governing Council left the interest rates unchanged. In his introductory statement to the press conference, Mario Draghi pointed out: “downside risks have increased again amid heightened uncertainty about emerging market economies’ growth prospects, volatility in financial and commodity markets, and geopolitical risks”. This is why he hinted that the European Central Bank is prepared to offer more stimulus measures in March to boost inflation: “it will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March”.

In anticipation of further stimulus from the central bank, the stock prices rose, while the euro fell against the U.S. dollar. In consequence, the price of gold declined slightly on Thursday. However, gold prices rose modestly in Asia on Friday and the yellow metal is set for a weekly gain.

Draghi’s comments are bearish for the gold market, as investors will anticipate further stimulus and will sell euro and buy the U.S. dollar, which is usually negatively correlated with gold. A similar statement in October created such expectations and pushed up the greenback. Given the ECB’s failure to meet the investors’ expectations in December, Draghi will be determined to please the markets in March and save the bank’s credibility. This increases the likelihood of substantial additional monetary stimulus. On the other hand, investors may be more cautious this time, keeping in memory the disappointing ECB actions in December and some recent disagreement in the Governing Council.

Summing up, the January ECB Meeting was dovish, which is bad news for the gold market. The expectations of further stimulus in March will support the U.S. dollar and might become a headwind for the price of gold. However, the recent gains were more on the safe-haven status than a weak greenback. Therefore, just as Draghi doesn’t give up in his heroic struggle with the lack of inflation, neither does gold.

If you enjoyed the above analysis, we invite you to check out our other services dedicated to the precious metals investors. We invite you to join our gold newsletter today – you’ll also gain 7-day trial of our premium Gold& Silver Trading Alerts. It’s free and if you don’t like it, you can easily unsubscribe.

Arkadiusz Sieron

Sunshine Profits‘ Gold News Monitor and Market Overview Editor

Arkadiusz Sieroń received his Ph.D. in economics in 2016 (his doctoral thesis was about Cantillon effects), and has been an assistant professor at the Institute of Economic Sciences at the University of Wrocław since 2017. He is a board member of the Polish Mises Institute of Economic Education, author of several dozen scientific publications (including in such periodicals as the Journal of Risk Research, Prague Economic Papers, Quarterly Journal of Austrian Economics, and Research in Economics), and a regular contributor to and His two books, Money, Inflation and Business Cycles and Monetary Policy after the Great Recession, are both published by Routledge. Arkadiusz is also a certified Investment Adviser, a long-time precious metals market enthusiast, and a free market advocate who believes in the power of peaceful and voluntary cooperation of people.

India and the U.S. trump Italy as top gold jewelry exporters.

Gold Eagle twitter                Like Gold Eagle on Facebook