Price of Gold Fundamental Daily Forecast – ECB Decisions, Draghi Remarks to Dictate Direction Today

Gold futures are trading higher on Thursday in reaction to a weaker U.S. Dollar Index as investors await the European Central Bank (ECB) interest rate and monetary policy decisions. Since the Euro controls the index and gold traders react to the index, the decisions by the ECB today will likely determine the direction of gold prices.

At 11:14 GMT, August Comex gold futures are trading $1341.10, up $7.50 or +0.56%.

Gold prices are also being influenced early Thursday by falling Treasury yields and a slight increase in demand for riskier assets. The dip in yields may be helping to underpin prices while the early strength in the stock market is helping to limit gains.

ECB Decisions to Dictate Direction

The EUR/USD is edging higher shortly before the ECB decisions and speech from President Mario Draghi. This follows a steep decline in the Euro which dragged down gold prices on Wednesday.

Traders are saying the ECB will try to give the ailing Euro Zone a boost and may even set the stage for more action later this year as an escalating global trade war unravels the benefits of years of monetary stimulus. The central bank is also expected to give updated staff growth and inflation forecasts.

Traders are also saying that ECB President Draghi is expected to maintain guidance about the possibility of more stimulus.

Basically, traders want to see if the Council will stick to its view that the economy will recover in the second half of the year. Draghi could trigger a volatile reaction in the Euro if he expresses concerns about growth and inflation.

Daily Forecast

Simply stated, a dovish ECB and Draghi could drive the Euro lower. If the Euro falls then the U.S. Dollar Index will rise. A stronger dollar will lower demand for dollar-denominated gold. Prices could plunge into $1311.80 to $1303.00 if the news is bearish enough.

If the ECB and Draghi come across as hawkish then look for the Euro to rally and the dollar index to weaken. This could trigger a breakout in gold above yesterday’s high at $1348.90 with the February 20 top at $1361.50 the next likely upside target.