Gold Rebounds from 5.5-Year Low as U.S. Dollar Hammered, Euro Currency Surges

By Paul Ploumis (ScrapMonster Author)

December 04, 2015 04:35:28 AM

(Kitco News) - Gold prices saw a moderate short-covering and bargain-hunting bounce in the aftermath of the European Central Bank easing its monetary policy Thursday. The ECB move was not unexpected but did prompt big price reversals in the U.S. dollar index (down) and the Euro currency (up) on this day. That led to the rebound in gold after its price overnight dropped to a 5.5-year low. Silver prices hit a six-year low Thursday. February Comex gold was last up $7.80 at $1,061.50 an ounce. March Comex silver was last up $0.096 at $14.105 an ounce.

The regular meeting of the ECB saw the central bank make its easing move, lower the deposit rate by 0.1%. Mario Draghi’s ensuing press conference was deemed by many European market watchers as not going far enough in the ECB’s easing measure.

What is surprising is that the Euro currency rallied sharply and the dollar index sold off sharply. This is a classic “buy the rumor, sell the fact” scenario for the USDX and a “sell the rumor, buy the fact” for the Euro currency. Don’t be surprised if the same contrary effect occurs if the FOMC raises its interest rates on December 16. 

The marketplace was still digesting some data and comments from the U.S. Federal Reserve Wednesday. While containing no surprises, the Fed’s beige book and comments from Fed Chair Janet Yellen reinforced notions the U.S. central bank will slightly raise U.S. interest rates in two weeks—for the first time in nine years. This did limit stronger buying interest in gold and silver markets Thursday. Yellen delivered a speech and testimony on the economy to U.S. lawmakers Thursday, but it was pretty much in line with what she said Wednesday.

The important U.S. jobs report is due out Friday. The key non-farm payrolls number is expected to be up around 205,000 in November. An OPEC oil cartel meeting also begins Friday and will be closely watched by the marketplace. There is talk Saudi Arabia may propose a collective oil-production cut for 2016, with the stipulation that non-OPEC members also cut their production levels. Most believe such a plan is a non-starter.

Courtesy: Kitco News