In the same category

December ECB Meeting and Gold

IMG Auteur
Published : December 09th, 2016
604 words - Reading time : 1 - 2 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : GoldWire

Yesterday, the European Central Bank released its most recent monetary policy statement. What does it imply for the gold market?

The ECB meeting was probably the most awaited event this week. The Governing Council decided that the interest rate on main refinancing operations and the interest rates on the marginal lending facility and the deposit facility would remain unchanged at 0.00, 0.25 and -0.40 percent, respectively.

However, the ECB modified its quantitative easing program. First, it will extend its monthly asset purchases by nine months, from March 2017 to the end of the next year. Second, the bank will reduce its monthly bond buying from €80 billion to €60 billion since April 2017. Third, it will broaden the maturity range of the public sector purchase program by decreasing the minimum remaining maturity for eligible securities from two years to one year. Fourth, the ECB will start buying securities under the asset purchase program with a yield to maturity below the interest rate on the deposit facility.

What do all these changes mean for the ECB’s stance, the U.S. dollar and the price of gold? Well, it is not easy to decide whether the introduced measures are hawkish or dovish. On the one hand, the central bank slowed the pace of asset purchases. This is a hawkish move which probably lies behind the rally in the euro against the U.S. dollar initially after the release of the monetary policy statement.

On the other hand, the ECB extended its monthly asset purchase program and relaxed the rules over which bonds it can purchase under QE. Hence, thanks to the extension and despite the tapering, the total remaining amount of purchases would actually be larger. This is definitely a dovish development, which probably explains why the euro plunged against the greenback after the initial upward move. Actually, the euro suffered yesterday its biggest daily loss against the U.S. dollar since Brexit, as one can see in the chart below.

Chart 1: The EUR/USD exchange rate over the last three days.

24hGold - December ECB Meeting...

The take-home message is that the ECB modified its monetary policy at its meeting in December. The introduced changes were considered dovish on balance, which should strengthen the U.S. dollar. Therefore, the statement is negative for the precious metals market. Indeed, the price of gold declined yesterday. Now, all eyes are on the Fed, which has monetary policy meetings scheduled next week.

If you enjoyed the above analysis, we invite you to check out our other services. We focus on fundamental analysis in our monthly Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. If you’re not ready to subscribe yet and are not on our mailing list yet, we urge you to join our gold newsletter today. It’s free and if you don’t like it, you can easily unsubscribe.

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

Gold News Monitor
Gold Trading Alerts
Gold Market Overview

Did you enjoy the article? Share it with the others!

Data and Statistics for these countries : Georgia | All
Gold and Silver Prices for these countries : Georgia | All
<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
Przemyslaw Radomski is the founder, owner and the main editor of www.SunshineProfits.com. Being passionately curious about the market’s behavior he uses his statistical and financial background to question the common views and profit on the misconceptions. “Don’t fight the emotionality on the market – take advantage of it!” is one of his favorite mottos. His time is divided mainly to analyzing various markets with emphasis on the precious metals, managing his own portfolio, writing commentaries, essays and developing financial software. Most of the time he’s got left is spent on reading everything he can about the markets, psychology, philosophy and statistics. Mr. Radomski has started investigating the markets for his private use well before starting his professional career. He used to work as an informatics consultant, but this time-consuming profession left him little time for his true passion – the interdisciplinary market analysis. Establishing www.SunshineProfits.com gave him the opportunity to put his thoughts, ideas, and experience into form available to other investors.
WebsiteSubscribe to his services
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Take advantage of rising gold stocks
  • Subscribe to our weekly mining market briefing.
  • Receive our research reports on junior mining companies
    with the strongest potential
  • Free service, your email is safe
  • Limited offer, register now !
Go to website.