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Gold price off its lows as ECB signals further stimulus in December

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(Kitco News) - Gold prices remain under pressure, but well off their session lows after the European Central Bank (ECB) signaled it would unleash new monetary policy stimulus measures in December as the European economy continues to feel the devastating effects of the COVID-19 pandemic.

ECB president Christine Lagarde said in a press conference following the ECB s monetary policy decision that it is clear the European economy will need further support as a second wave of the coronavirus forces countries to institute new lockdown measures.

We have little doubt that circumstances will warrant a recalibration and implementation of monetary policy,” she said.

The dovish outlook is helping gold prices recover from Wednesday sharp selloff. Panic selling has swept through financial markets this week as investors shift their expectations on global growth. December gold futures last traded at $1,871.80 an ounce, down 0.39% on the day.

The comments come as the ECB continues to see significant risk to the European economy heading into the new year. Wednesday, both France and Germany announced new lockdown measures as both countries have seen a surge in new COVID-19 infections.

The risks surrounding the euro area growth outlook are clearly tilted to the downside,” Lagarde said in her opening remarks. This largely reflects the recent resurgence in COVID-19 infections, the associated intensification of containment measures and a highly uncertain timeline of the pandemic and its implications for economic and financial conditions.”

Lagarde said that the staff are currently analyzing its programs ahead of December s meeting. The December meeting will also see the release of the central bank s updated economic projections. She added that this recalibration will touch on all of the central bank s tool to find the best mix to support lending conditions and the European economy.

On the basis of this updated assessment, the Governing Council will recalibrate its instruments, as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favorable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path,” Lagard said.

Lagarde s dour outlook came after the ECB said that it maintained its interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25%, and -0.50%, respectively.

The central bank also said that it would maintain the current pace of its emergency stimulus measures.

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