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Gold Snaps Three-Day Winning Streak After ECB Announcement

October 20, 2016 at 17:20 by Andrew Moran

Gold snapped its three-day winning streak on Thursday after the European Central Bank (ECB) left interest rates unchanged and pledged to move ahead with its near $2 trillion quantitative easing (QE) program until next year.

December gold futures tumbled $3.00, or 0.24%, to $1,266.90 per ounce at 16:53 GMT. After suffering steep losses since the end of September, gold has slightly rebounded this week by putting forward three consecutive trading sessions of wins. The yellow metal has been battered in recent weeks as the chances of a December rate hike by the Federal Reserve remain high.

Silver also failed to muster up a rally towards the end of the trading week. December silver futures decreased $0.12, or 0.70%, to $17.54 an ounce. Year-to-date, silver has climbed roughly 40%.

ECB President Mario Draghi announced on Thursday that the central bank would leave the marginal lending facility rate at 0.25%, the main refinancing operations fixed rate at 0.00% and the deposit facility rate at negative 0.40%. The Governing Council also confirmed that it would maintain its monthly asset purchases of $87 billion (€80 billion) until at least the end of March 2017.

Speaking with reporters after the announcement, Draghi stated that there would unlikely be an “abrupt ending” to its own form of QE, noting that the ECB would decide at its December 8 meeting. He hinted that the ECB might move ahead with further asset purchases, which would expand the aggressive $1.95 trillion monetary initiative. Draghi did aver that policymakers have yet to talk about any tapering at all.

It is quite clear our decisions in December will tell you what we are going to do in the coming months. We took stock of the ongoing technical work, that is designed to ensure smooth execution to March or beyond if necessary.

Ultra-low and subzero interest rates tend to benefit gold as the opportunity costs shrink. The yellow metal also serves as a hedge against inflation and a safe haven asset against tepid economic growth, political instability, and volatile financial markets.

If you have any questions and comments on the commodities today, use the form below to reply.

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