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ECB's Mario Draghi Does Little To Move Gold Prices

Kitco News

(Kitco News) - ECB President Mario Draghi’s comments did little to move gold on Thursday following the bank’s decision to start trimming its monthly asset purchases in January.

Immediately after the European Central Bank’s (ECB) statement, gold edged down, with December Comex gold briefly touching $1,273.60 and then going back up and last trading at $1,278.10, down 0.07% on the day.

Even Draghi recognized that market reaction was muted to ECB’s monetary policy announcement, noting that this reflects all the communication on behalf of ECB to the market.

At the press conference, which followed the ECB decision, Draghi elaborated on cutting down the bank’s monthly bond-buying program.

“We will continue to make purchases under the asset purchase programme (APP) at the current monthly pace of €60 billion until the end of December 2017. From January 2018 our net asset purchases are intended to continue at a monthly pace of €30 billion until the end of September 2018, or beyond,” Draghi said.

He also added that the asset purchase program could be extended past September, if deemed necessary.

On top of that, Draghi said that the bank will reinvest the principal payments from maturing securities purchased under the asset purchasing program once it ends “for as long as necessary.”

“This will contribute both to favorable liquidity conditions and to an appropriate monetary policy stance,” he noted.

Slowly improving inflation and “unabated growth” were also highlighted during the press conference. 

“Today’s monetary policy decisions were taken to preserve the very favorable financing conditions that are still needed for a sustained return of inflation rates towards levels that are below, but close to, 2%,” Draghi said. 

Draghi reiterated that interest rates were left unchanged and noted that they are expected to remain the same levels for “an extended period of time” and “well past the horizon of our net asset purchases.”

The main refinancing operations and the interest rates on the marginal lending facility and the deposit facility were left unchanged at 0.00%, 0.25% and minus 0.40%, respectively.

Economists interpreted ECB’s stance as dovish. “While the decision today was broadly in line with expectations, the dovish tone regarding future interest rates has been negative for the euro,” said Andrew Grantham, senior economist CIBC Capital Markets.

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