The reaction of precious metals markets to the ECB decision

котировки драгоценных металлов

The decision of the European Central Bank on Thursday 10 March had a major impact on all commodity markets like stock and foreign exchange, and commodity. Stock indices showed a temporary rise immediately after the information about the monetary policy of the ECB, at the end of the trading session showed a negative trend, the Euro currency showed completely opposite motions.

Quotations of precious metals

After the US published not very good information on the labor market, as well as against the decision of Mario Draghi, the dollar showed further weakening. As practice shows, as soon as the dollar goes down and stocks are unable to determine price trend, then precious metals begin to grow.

The precursors to the recent rise of precious metals:

  • in connection with the strengthening of the yuan over the past week precious metals in Shanghai have decreased. The level of gold production in China for 2015  has decreased in relation to 2014 for 0.4%, while gold consumption in the country increased by 34.8%;
  • gold production in South Africa in February 2016 increased by 26% compared to the December 2015, due to the economic problems of the country in the fall and winter of last year (when gold production decreased by 2.8% just in December);
  • gold imports into Turkey in February 2016 decreased by 45% in comparison with February of last year, to 1.15 tons. In January the import was 1.04 tons;
  • gold production in Russia for January 2016 (according to the Ministry of Finance) was at the level of 13.96 tons, which is 7.6% more than a year ago.

world gold price

While being at a local minimum of 1265 USD per ounce, price showed an increase from the anticipated resistance 1287-1300 USD and level of possible support 1237-1225 USD.

Precious metals quotations are correlated to each other: silver showed a similar trend, falling on the eve of the ECB decision to 15.59 USD. Platinum stood at $ 978, palladium — 570 USD.

Friday, March 11: the reaction of precious metals markets

On the eve of the ECB meeting, the precious metals were influenced by the “bears”, i.e. showed a tendency to decrease. The opening of Friday’s trading showed that investors made decision, making a bet on a “safe haven”. The price of gold has established its new annual peak level 1283,33 USD, by mid-afternoon dropping to $ 1273.

The nearest support level of price trend is at a level of 1265 USD, but a break of this level and price drop to $ 1251 USD is possible. Most experts are inclined to believe that gold will still go down.

The silver market was opened with the similar trend. The metal hit the top level of 15.72 USD, however, turned in the correction. Most estimated forecasts – for a decline of price trend to the levels of 15.43-15,20 USD per ounce.

Forecast on gold for the long term. Precious metals will be in a fairly wide corridor, which will display a drop-down trend. Achieving interim highs since the beginning of this year was replaced by a falling trend. Since there is every reason to speak about restoration of economy of China in the second half of 2016  and the next rate hike, the fed will return the attention of investors to the U.S. currency, we can not count on rising of gold. Possible short sharp climbs, but the overall trend will remain negative and will return the gold to level 1100 and below.

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