UNITED STATES March 10 2016 8:35 AM
NEW YORK (Scrap Register): There is potential for increased volatility in gold during the last two days of a week due to an early-Thursday meeting of the European Central Bank, said Edward Meir, commodity consultant with INTL FCStone.
ECB decisions on interest-rate policy influence the euro, in turn impacting gold due to the metal’s inverse relationship with the U.S. dollar.
“Keep in mind that the central bank blindsided the markets last time around when it came across more hawkish than what was expected,” said Meir.
“Even if it strikes a more dovish tone this time, it may not necessarily follow that the euro will decline given its fairly resilient tone just two days prior to the meeting,” he added.
“We should also remember what happened to the yen after the Bank of Japan’s decision to go negative on rates earlier this year; the currency slumped initially, but then reversed course to stage a spectacular advance, much to the disappointment of the authorities. If we see the same upside reversal in the euro, gold could push higher, especially if oil and equity weakness persists into the remainder of the week,” Meir continued.
