by Mark O’Byrne, Gold Core:
Gold prices climbed to a 13-month high in dollar terms overnight ($1,282.51) after the increasingly adventurous, dare one say reckless, European Central Bank unleashed its latest ‘bazooka’ and initiated more interest-rate cuts, a significant extension in currency printing and bond purchases and also a potential subsidy to banks lending.
Gold in EUR – 1 Year
Draghi cut the ECB’s deposit rate by a further 10 basis points to minus 0.40 percent, and its main refinancing rate to zero and announced that the ECB may buy nearly a whopping €1 trillion in corporate debt.
The move was even more dovish than expected and confirmed, if any confirmation was necessary , that the ultra loose monetary policy adventure has intensified and will actually deepen in the short term.
Gold reached 3 year highs in euro terms at €1,161.40 per ounce on Monday after 4% gains last week – likely anticipating ‘Super Mario’ Draghi’s latest attempt at pulling a rabbit out of the hat. There is likely an element of ‘buy the rumour and sell the news’ as year to date euro gold has already eked out strong gains of 17%.
On the announcement yesterday, the euro fell initially versus gold from €1,135 per ounce to €1,155 per ounce prior to reversing and falling back to €1,135 per ounce as the euro strengthened. Gold in euro terms was actually marginally lower by the close yesterday and is marginally lower this week after the multi-month record high on Monday.
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