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Gold Firms On ECB Decision
Posted May 8th, 2014
TANGIBLE INVESTMENTS - Los Angeles - by James O'Dell - The gold price remained below the key $1,300 an ounce level on Thursday but continued to hold firm around $1,289.00 an ounce in choppy trade while silver eased to $19.16 an ounce, as investors react to Fed Chair Janet Yellen’s testimony before lawmakers on U.S. central bank monetary policy for a second day in a row.
“The tone of Janet Yellen’s comments (was) slightly negative for gold and the break below $1,300/ounce may encourage near-term momentum sellers. Weak prices near term may continue until geopolitical tensions or fresh physical buying halt losses. But Ms. Yellen’s comments are not a departure from current policy and so while we expect gold to be weak near term, the downside is likely limited, we believe,” said HSBC on Thursday.
The temporary weakness in precious metals prices has also been attributed to the supposed de-escalation of tensions in Eastern Europe by Russia's President Putin after promising to withdraw military forces from the eastern Ukrainian border.
Putin then called for pro-Moscow separatists in the eastern region of Ukraine to postpone a secession referendum planned for Sunday, just two weeks before fresh elections are scheduled to take place in Kiev on May 25. Separatist insurgents were undeterred and vowed to fight on and to hold the referendum on Sunday as planned, making one wonder just how much control Moscow exerts over these groups of heavily armed protestors.
In the Euro zone, the European Central Bank (ECB) has decided to refrain from taking any action on interest rates until next month, said ECB President Mario Draghi. "The Governing Council is comfortable with acting next time but before we want to see the staff projections that will come out in early June," said Draghi after the ECB announced its decision to keep interest rates unchanged at 0.25 percent.
"We will maintain a high degree of monetary accommodation and act swiftly if required with further monetary policy easing," said Draghi, adding that while all options remained on the table it was decided by policymakers to keep rates unchanged.
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