Can The ECB Help Gold Avoid A Total Meltdown?
Today’s Spotlight Market
Gold futures received a boost from the European Central Bank when bank President Mario Draghi stated that unconventional measures may be taken to spur growth.? These measures could include asset purchases, including physical bullion and ETFs.? Inflation in the Eurozone is lower than ECB leadership would like to see, reinforcing Mr. Draghi?s statement.? Even if the ECB chooses to stay away from bullion purchases, aggressive monetary policy could be beneficial to Gold prices.???? ?
Fundamentals
Physical demand for Gold, outside of exchange traded products, has remained relatively healthy.? This may suggest that prices could find a basement level sooner rather than later.? According to Governor Elivra Nabiullina of the Central Bank of Russia, the bank has purchased 150 metric tons of Gold bullion this year.? Since the end of September, when the bank last reported reserve data, the CBR has added 35 metric tons.? The SPDR Gold Shares Trust ETF has added 2.39 tonnes on Monday, which was the first increase in around two weeks and the largest increase in a month and a half.? The Indian government is expected to restrict Gold imports in reaction to a spike in recent imports of the metal.? It will be interesting to see how the US Dollar Index moves going forward.? Right now, it looks as though the index is consolidating in a flag-like formation.? Failure to break out to the upside could be seen as negative for the greenback.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the December Gold contract bouncing after testing the 1150 level on the downside.? Had prices broken through the level with any vigor, a test of the 1100 mark was all but imminent.? If prices are able to manage several solid closes above the 1200 level, Gold may gain some upward traction.? The RSI indicator has recovered from oversold levels as the result of recent activity.? It is of interest to note that the momentum indicator has remained relatively flat, compared to prices and the RSI, suggesting this could be a dead cat bounce in Gold prices.
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