(Kitco News) - The gold market is experiencing increased volatility, with record highs against the euro, after the European Central Bank cut interest rates across the board by 25 basis points, in line with economist expectations.
The central bank said that falling inflation pressures are giving it room to loosen its restrictive monetary policy as it cuts the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 3.25%, 3.40% and 3.65% respectively.
“ The incoming information on inflation shows that the disinflationary process is well on track. The inflation outlook is also affected by recent downside surprises in indicators of economic activity. Meanwhile, financing conditions remain restrictive,” the central bank said.
Gold is holding to gains following the monetary policy decision but is slightly down from its overnight record highs. Spot gold against the euro last traded at 2,469.01 an ounce, up 0.37% on the day.
Looking ahead, while the ECB is expected to remain data-dependant in this easing cycle, analysts expect to see further easing through the first half of 2025.
“The base case remains that the ECB will deliver another 25bp cut at the December meeting, followed by further such cuts at every meeting in early 2025 until the deposit rate reaches a neutral rate of around 2% next summer,” said Michael Brown, Senior Research Strategist at Pepperstone, wrote in a note.
