Gold sits on ECB policy moves

The gold (COMEX:GCN14) price continues to tread water ahead of today’s European Central Bank meeting and tomorrow’s U.S. non-farm payroll data release.

The ECB meeting later today is widely expected to result in new monetary stimulus measures announced, given the strengthening in the euro (CME:EC) recently. The consensus seems to be that the refinancing rate will be cut by 10 to 15 basis points, while the deposit rate will be criminally cut to below zero, giving a negative return on depositors’ money. ECB President Mario Draghi is also likely to leave the door open for quantitative easing and asset purchases later in the year.

Given the strength of the U.S. dollar index (which hit a two-month high this week), it is likely the market has already accounted for the announcement of further stimulus measures in the European Union and so we may see little reaction in the precious metals. However, look out for how both the euro and U.S. dollar (NYBOT:DX) react to any ECB announcement today.

Before COMEX closed yesterday, gold did jump slightly in response to the low ADP national employment report. The ADP report is often seen as an indicator to the non-farm payroll and has been fairly accurate recently. The latter is expected to show 215,000 new jobs were added in May; the ADP report fell short of this, showing just 179,000. The ADP’s indication that non-farm payroll data could be slightly on the downside suggests there will be a bullish reaction from both the gold and silver (COMEX:SIN14) price.

Gold transfers

Clearing statistics released yesterday by the London Bullion Market Association showed the average value of gold transfers was relatively unchanged for April at $25.4 billion. However, the amount of gold transferred between LBMA member accounts climbed by 3.2% compared to the previous month. This, combined with the lower gold price, meant there was little change in the average value of gold transfers. A total of 19.6 million ounces of gold were transferred daily, a drop from the same period last year. In contrast, there was a 6% fall in the number of silver transfers compared to the previous month.

About the Author

Jan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment.