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European Central Bank Maintains Low Interest Rate

Release Date: 
Thursday, February 7, 2013

Gold was marginally higher will silver remained flat today in advance of statements from the European Central Bank (ECB).  Gold was $0.90 higher at 5:47 a.m. Pacific Time on the New York Spot Market, at $1,679.20 per ounce.  Spot silver was $0.01 lower at $31.94 per ounce.  (Click here for the most current spot prices.)

Markets will look to ECB statements for policy guidance. "Gold is very much dependent on the outcome of the ECB,” said Joyce Liu, an investment analyst at Phillip Futures in Singapore.  “I don't think today they will give us a clear indication whether the euro is indeed overvalued. If they try to weaken the euro because the economy hasn't bottomed out, then in that case, it's possible gold may go up a bit."

According to HSBC metal strategists, “if ECB president Mario Draghi offers no resistance to further euro gains after the policy meeting, the markets may heed to this and take the euro-dollar higher,” they said. “A stronger euro may lend some support for bullion, in our view.”

"It is going to be interesting to see if the ECB says anything about currencies today," Bank of America Merrill Lynch analyst Michael Widmer said.

HSBC also expects a more loose, accelerated and broad policy-easing plan from the Bank of Japan (BoJ) that may support gold.  “Bullion is historically sensitive to global monetary policy stimulus and expectation of further accommodations by the BoJ is gold positive, we believe,” the HSBC analysts said.

(Sources: “Gold futures inch higher ahead of ECB,” Marketwatch, February 7, 2013; “PRECIOUS-Gold market steadies ahead of ECB meeting,” CNBC, February 7, 2013; “PRECIOUS-Gold edges up before ECB meets, PGMs near 17-mth highs,” Reuters, February 7, 2013)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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