Gold Price Jumps to One-Month High after ECB Meeting

GOLD PRICE NEWS – The gold price climbed $15.87, or 1.0%, to $1,635.04 per ounce Wednesday morning amid weakness in the U.S. dollar and a broad-based rally in financial markets.  In doing so, the spot price of gold reached its highest level since May 7th and extended its gain in June to 4.6%.  The gold price responded favorably to the latest European Central Bank (ECB) meeting, where its benchmark interest rate was left unchanged at a record-low 1%.

While the ECB did not lower rates – as a minority but still considerable group of economists were expecting – it did extend the timeframe for banks to receive unlimiited access to ECB loans via long-term refinancing operations (LTRO) and reiterated its objective of acting “firmly and in a timely manner on inflation.”

Following the ECB’s announcement, the euro currency advanced 0.5% to 1.2515 against the U.S. dollar.  European equity markets rallied across the board as well, with the benchmark indices in England, France and Germany all higher by at least 1.6%.  As for U.S. markets, the Dow Jones Industrial Average (DJIA) rose 156.21 points, or 1.3%, to 12,284.20 and the S&P 500 Index advanced 16.16 points, or 1.3%, to 1,301.66.

Commenting on the ECB’s decision, ABN Amro head of macroeconomic research Nick Kounis wrote in a note to clients that “The central bank has very limited ammunition left and may have wanted to keep its powder dry, (still) the ECB is likely to leave the door for rate cuts wide open in its press conference.”

Silver jumped alongside the gold price this morning, by $1.05, or 3.7%, to $29.66 per ounce.  This brought gold’s sister precious metal to its best level since early May as well and extended its gain this month to 6.6%.  Among other precious metals, platinum futures rose 1.7% to $1,465.10 per ounce and palladium added 0.8% to $625.00 per ounce.  Cyclical commodities turned higher as well, with copper futures climbing 2.2% to $3.36 per pound and crude oil advancing 2.3% to $86.20 per ounce.

Gold shares turned higher in conjunction with the price of gold and the broader equity markets, as the Market Vectors Gold Miners ETF (GDX) rallied 1.6% to $48.28 per share.  Barrick Gold (ABX) climbed 1.2% to $42.56 per share despite announcing that it has appointed current CFO Jamie Sokalsky as President and CEO to replace Aaron Regent.  The Canadian-based gold producer cited its disappointment with the company’s “share price performance” as a factor in replacing Regent.

As for the gold price, analysts at UBS noted in a report this morning that “Gold’s sharp rally after a vastly disappointing U.S. employment print last Friday and its ability to subsequently hang on to most of those gains is commanding attention…Today is far more of a test of the follow-through interest, and this week there will be plenty of opportunities for gold to either pass the safe haven test or reverse back into its old risk-on shell.  So far, gold is attracting European buying and has traded up to the high of $1,637.”