The gold price held onto its pre-2015 closing level despite the dollar reaching a fresh four-and-a-half-year high against the euro after ECB President Mario Draghi fuelled speculation that the central bank will start a quantitative easing programme.
Spot gold was last at $1,185.30/1,186.10 per ounce, up $1.90 for its previous closing level and trading within a narrow $4 intraday range, which is typical in a holiday-shortened week shorn of liquidity.
Gold has shrugged off dollar reached a low of 1.2034 against the euro – its best since June 2010 – although it has since retreated slightly to 1.2053.
The ECB’s Draghi signalled the increased likelihood of quantitative easing in the struggling eurozone, telling German newspaper Handelsblatt that “the risk that we do not fulfil our mandate of price stability is higher than six months ago”.
He faces increased difficulty in stoking inflation within the bloc economy in the face of falling oil prices, marginal growth and the increased possibility of recession. Inflation of just 0.3 percent is running far short of its target of close to but below 2.0 percent.
“We are in technical preparations to adjust the size, speed and compositions of our measures in early 2015, should it become necessary to react to a too long period of low inflation. There is unanimity with the governing council on this,” he added.
Forecast-missing manufacturing data this morning out of the Eurozone will only add to those prospects – the Spanish PMI continued to grow in December but at a slower rate than in November – at 53.8, it also undershot the expected 54.9.
The Italian manufacturing PMI at 48.4 was below the predicted 49.6 and the previous month’s 49.0, with the overall eurozone figure at 50.6, below the expected 50.8.
“[There are] increasing expectations the ECB has no choice but to launch a full blown QE programme, particular as lower energy prices seem set to intensify deflationary pressures,” FastMarkets analyst James Moore said.
The increased possibility of eurozone QE, which may be announced as early as this month’s ECB meeting, lifted equities earlier but all major European indices are now down either side of 0.6 percent.
In data still to come today, the final manufacturing PMI, ISM manufacturing PMI and construction spending figures are all due out of the US.
In the other precious metals, silver at $15.81/15.86 per ounce was up 17 cents and will looking again to break through $16. Platinum at $1,207/1,212 was up $8 and palladium was $4 higher at $795/801.
(Editing by Mark Shaw)
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