Gold futures are trading steadily higher on Thursday, shortly before the opening of the regular session and the release of the European Central Bank (ECB) policy announcements. Earlier in the session, gold hit a week-long high as the US dollar weakened, however volume is light, suggesting general nervousness and uncertainty ahead of the ECB’s decisions at 11:45 GMT. .
At 08:58 GMT, December Comex gold is trading at $ 1954.90, unchanged.
In addition to the news from the ECB, gold traders are also positioning themselves ahead of today’s US reports on producer inflation and weekly jobless claims. Other key events on the watch list include Friday’s US consumer inflation report and the two-day meeting of the Federal Reserve next week.
In the long term, gold remains well supported by a broad money supply, historically low interest rates and geopolitical uncertainty.
ECB decisions expected to drive price action
The ECB’s decisions should boost gold price action due to its close relationship to the US dollar. Anything the ECB says will boost the euro and the single currency accounts for roughly 57% of the US dollar index, a key indicator that many gold traders use in their analysis.
A couple of weeks ago, the US Federal Reserve announced that it was adopting average inflation targets, at least in principle, that pressure foreign central banks to take moderate measures if they do not want their currency to appreciate too much. The initial report brought the euro to the 1.20 level. A level it hadn’t seen since 2018. Gold rose as the dollar weakened.
Last week, a statement by the European Central Bank’s chief economist, Philip Lane, that “the euro / dollar rate does matter,” helped limit the euro’s rise. This also encouraged long investors to post a profit, leading the US dollar higher and dollar-denominated gold lower.
Daily forecast
This week’s price action clearly shows that gold prices will be heavily influenced by the ECB’s decision today at 11:45 GMT. We expect the ECB to say that it is ready to ease policy further so that inflation returns to its pre-crisis path. Furthermore, we also believe that policymakers are going to emphasize that, although it does not have price targets for the euro, overvaluation and excessive price swings do affect its macro projections and therefore the proper stance of your monetary policy.
Furthermore, we expect the ECB to suggest that it will again relax policy by the end of the year. This should put pressure on the euro and gold.
Our outlook is moderate for the ECB, which would be bearish for the euro and gold. But keep in mind that this news may already be priced in the market.
To see all of today’s economic events, check out our economic calendar.
