European Central Bank policy meeting to address the strong euro

Daniel Fowler
September 11, 2020

Gold has gained 0.8 per cent so far this week.

Silver has been trading lower tracking weakness in gold prices.

Gold has been one of the most consistent gainers through the six months of coronavirus pandemic-led turmoil in financial markets.

"Gold has witnessed mixed trade in last few sessions but seems to be holding in a broad range of $1,900-2,000/oz and unless either side is broken, we may see directionless trade".

The dollar index bounced back on Friday following a steep drop against the euro in the previous session and was on track for its best week since mid-May.

Elsewhere, silver dropped 1.2% to $26.61 USA per ounce and palladium lost 0.7% to $2,278.86.

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The European Central Bank announced on Thursday (4 June) that it will add €600 billion to its €750 billion bond-buying response against the coronavirus, in its first governing council meeting after Germany's Constitutional Court ruled against the bank's asset-purchasing programme.

"Gold also benefitted from some pick up in investor buying".

A stronger United States dollar makes gold more expensive for holders of other currencies.

The dovish stance, which gives more weight to the labor market and less weight to inflation, has added to the downward pressure on the USA dollar, and the ECB's Christine Lagarde is expected to talk down the euro as much as she can. "We however expect buying interest to emerge at lower levels as increasing challenges to global economy may increase gold's safe haven appeal while Fed's dovish stance and concerns about United States economy may limit upside in U.S. dollar", the brokerage added.

European Central Bank President Christine Lagarde took a modestly upbeat view on Europe's recovery from a historic recession yesterday and played down concerns about the euro's strength, disappointing hopes she would signal more stimulus.

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