Price of Gold Fundamental Daily Forecast – Gold Firms after ECB Passes on Rate Cut

Gold futures are trading higher on Thursday after the European Central Bank (ECB) kept its benchmark interest rate unchanged, while altering its forward guidance amid deteriorating economic data in the Euro Zone. The move is likely being fueled by short-covering from gold traders who had been betting on more aggressive action by the central bank. The actual direction of gold today is likely to be determined when ECB President Mario Draghi holds his press conference at 12:30 GMT.

At 12:01 GMT, December Comex gold is trading $1444.40, up $7.90 or +0.55%. The market is currently trading at its high of the week. The low of the week is $1414.60.

According to the Wall Street Journal, “The European Central Bank signaled Thursday that it is preparing to cut short-term interest rates for the first time since early 2016 and possibly restart its giant bond-buying program, a policy shift aimed at insulating the Euro Zone’s wobbling economy against international headwinds that range from trade tensions to Brexit.”

“The ECB said in a statement that it expects its key interest rate, currently set at minus 0.4%, to remain at its current level or lower through the first half of 2020. The central bank also said its staff would examine options aimed at pushing up persistently low inflation, including potential new asset purchases,” the Wall Street Journal reported.

Daily Forecast

The remarks from the ECB send a strong signal that the central bank is preparing to announce a major stimulus package at its next policy meeting on September 12.

Gold may have rallied after the ECB decision because some traders had priced in a 10-basis point rate cut. This would’ve driven the Euro lower and the U.S. Dollar Index higher. A stronger dollar would have pressured dollar-denominated gold prices.

Investors are now waiting to hear from ECB President Mario Draghi. If his remarks are dovish then the Euro could plunge to a new low for the year. This would drive the U.S. Dollar sharply higher and gold prices sharply higher.

If Draghi, who is retiring in late September, says the ECB could wait until have his term expires to make the move toward more stimulus then look for gold prices to rally.