ECB rate decision pressures gold

The European Central Bank’s decision yesterday to leave interest rates unchanged at 1% pushed more traders out of commodities, with precious metals coming under more selling pressure following the news. Gold is now floating around $1,630 while silver has fallen just below $30 – an area however where we should see strong bids coming in for the white metal. Likewise, gold should encounter strong buying support below $1,650, though a lot depends on the latest US nonfarm payrolls report due out today. A disappointing number will encourage speculation that Helicopter Ben and the Federal Reserve will engage in more quantitative easing; but a stronger number will dampen such expectations, and could pile further short-term selling pressure on precious metals.

Another day, and yet more gloomy eurozone economic statistics – this time showing the eurozone’s service sector shrunk much faster than expected last month, with Spain, Italy and France all recording sharp fall in this sector, and even Germany struggling with slower than expected growth. This makes a troubling backdrop for Sunday’s Greek election, where minor parties on the fringes of the political spectrum are expected to do well. However, as Yaris Varoufakis – head of the University of Athens’ economic department – discuses on BBC radio, none of this may matter much in the end:

“I don’t think you should be holding your breath regarding any radical repercussions of this election. More or less it’s already been stitched up. We’re going to have a weak government, but nevertheless a stable government like the one that we’ve had since November. It will be a coalition government and it’s going to ruled by fax or email from Brussels or Frankfurt or Berlin, who will tell them what to do.”

Likewise, it remains a good bet that nothing much will change in France either should Socialist Francois Hollande ascend to power. Things may have to get a lot worse economically before big political changes come to Europe.

Author: The GoldMoney News Desk

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