(Kitco News) - Gold is holding its ground near all-time highs against the euro as the European Central Bank left interest rates unchanged.
Thursday, in a much-anticipated move, the ECB left interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 4.25%, 4.50% and 3.75% respectively.
The central bank provided little forward guidance on future rate cuts, noting that it remains data-dependent.
Although inflation ticked higher last month, the central bank dismissed the rise as “one-off factors.”
“Most measures were either stable or edged down in June. In line with expectations, the inflationary impact of high wage growth has been buffered by profits,” the ECB said in its monetary policy statement.
“The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. It will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim,” the ECB addd. “The Governing Council is not pre-committing to a particular rate path.”
The gold market is not seeing much movement in its initial reaction to the decision, as it remains in positive territory. Spot gold last traded at €2,253.62 an ounce,m up 0.31% on the day.
Helping to support the gold price is the fact that markets continue to price in rate cuts later this year.
Michael Brown, Senior Research Strategist at Pepperstone, described the ECB monetary policy decision as a “boring, cut and paste statement.” However he added that the ECB is still on track to loosen its monetary policy this year.
“A 25bp cut at each of the September and December meetings remains the base case, and a policy path which money markets almost fully price,” he said. “In short, policymakers sought not to 'rock the boat' before the annual summer break, though remain primed to deliver the next cut of the cycle in 8 weeks' time.”
