(Kitco News) - The gold market continues to trade at all-time highs against the euro and could remain well supported as the European Central Bank cuts interest rates, as economic uncertainty grows and inflation pressures weaken.
In an anticipated move, the European Central Bank once again lowered its three key ECB interest rates by 25 basis points on Thursday. The interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be cut to 2.25%, 2.40% and 2.65% respectively, the central bank said.
The gold market is not seeing significant new momentum in its initial reaction to the ECB; however, it continues to trade at all-time highs. Spot gold last traded at €2,938.28 an ounce, up 0.27% on the day.
Although the ECB continues to warn about downside risks to the economy, its latest monetary policy statement did not provide much new information.
“Inflation has continued to develop as staff expected, with both headline and core inflation declining in March. Services inflation has also eased markedly over recent months. Most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis,” the ECB said. “The euro area economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions. Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. These factors may further weigh on the economic outlook for the euro area.
The central bank reiterated that it remains data-dependent and its monetary policy is not on a preset path.
