Gold Under Pressure As ECB In No Hurry To Raise Interest Rates
(Kitco News) - Gold is under renewed selling pressure Thursday, trading near session lows as the European Central Bank indicates that it is in no hurry to raise interest rates within the next year.
Photo courtesy of the ECB: Mario Draghi, ECB President
The gold market continues to feel the effects of a stronger U.S. dollar, particularly against the euro after ECB President Mario Draghi said that the central bank’s governing committee doesn’t expect to raise interest rates until at least through the summer of 2019.
At the same time though, Draghi also said in his opening statement that the committee expect to start cutting back its bond-purchasing program in September and end the program in December.
August gold futures last traded at $1,228.4 an ounce, down 0.27% on the day. Gold prices continue to remain below critical resistance, hovering above last week’s 12-month low. At the same time, the U.S. dollar index hangs around a one-year high, last trading at 94.43 points. The euro has a heavy weighting in the U.S. dollar index.
While Draghi was relatively optimistic on the eurozone economy, he added that there is still need for significant monetary policy stimulus.
Draghi noted that while inflation has pushed higher in recent months, it still isn’t on a consistent path higher. He added, “It is too early to declare victory.”
He commented that euro-area economic growth is “solid and broad-based.” However, he also highlighted growing risks to growth.
“The risks surrounding the euro-area growth outlook can still be assessed as broadly balanced,” he said in his opening statement. “Uncertainties related to global factors, notably the threat of protectionism, remain prominent. Moreover, the risk of persistent heightened financial market volatility continues to warrant monitoring.”
Draghi also acknowledged the recent drop in trade tensions following a meeting between European Commission President Jean-Claude Juncker and U.S. President Donald Trump. However, Draghi added that it is still too early to determine what impact the recent talks will have on the European Economy.
“It’s a good sign and it shows that there is a willingness to discuss trade issues,” he said.