Gold Prices At Two-Week High Following Mixed Messages From ECB
(Kitco News)- Gold prices are trading near atwo-week high as renewed strength in the euro weighs on the U.S. dollarfollowing mixed messages from the European Central Bank.
ECB President Mario Draghi reiteratedthe central bank’s commitment to end its monthly bond-purchase program and wasfairly optimistic on inflation expectations as he noted lower growth forecastsfor this year and the next.
In its updated staff projections,the central bank said that it sees Europe’s economy growing by 2% this year,down slightly from June’s forecast of 2.1%. The economy is expected to grow by1.8% next year, down a tick from the previous forecast of 1.9%. Growthprojections were left unchanged at 1.7% for 2020.
Inflation expectations were leftunchanged at 1.7% through 2020.
Draghi explained that the drop ingrowth expectations was the result of weaker foreign demand. However, heremained optimistic that the euro zone is on the right path.
“The underlying strength of theeconomy continues to support our confidence that the sustained convergence ofinflation to our aim will proceed and will be maintained even after a gradualwinding down of our net asset purchases,” he said.
Although Draghi’s tone was mostlyoptimistic, he did highlight growing risks to the global and European economy.
“Risks relating to risingprotectionism, vulnerabilities in emerging markets and financial-marketvolatility have gained more prominence recently,” he said.
Many economists have describedthe press conference as “uneventful” with the central bank providing little newguidance on monetary policy. While its quantitative easing measures areanticipated to end in December, the central bank has said does not expect toraise interest rates until after the summer 2019.
Gold prices have pushed to atwo-week high during the press conference, but analysts have said that strengthin the euro is more related to weak U.S. economic data that was released thesame time as the press conference.
December gold futures last tradedat $1,216.20 an ounce, up 0.43% on the day.
U.S. Consumer Price Index showedannual inflation pressures rose to 2.7% last month, down from 2.9% seen inJuly.
Adam Button, currency strategist at Forexlive.com said thatthe euro is benefiting from Draghi’s comments because markets were expecting amore dovish response from the central bank.
“The risk was that becauseof soft data and risks, Draghi would push out the timeline for a rate hike fromaround this time next year to later,” he said. “That didn't happen. Instead,Draghi repeatedly emphasized strong underlying momentum in the economy.”
By Neils ChristensenFor Kitco News
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