Gold investors may have their eyes around the European Central Bank’s Thursday meeting, as signs of a slowing economy and deflationary pressures point to further easing.
How it will do same with the large question.
If the central bank cuts its deposit rate by 10 basis points, that would take it right down to negative 40 bps.
While that seems the most likely outcome, Macquarie Capital Markets analyst Michael Gray noted this could damage confidence, particularly in the banking sector.
Nonetheless, he pointed out that these developments are positive for the gold market, which climbed 3.7 percent to the highest level since February 2015 last week.
“Increases were all the more impressive given Friday’s non farm payrolls,” Gray said, highlighting strong growth of 242,000 jobs for that U.S. economy in February.
Most notable for gold, is the fact that it has decoupled growth from key U.S. economic data in recent weeks.
As an effect, Gray noted that global yields are actually more essential for bullion, which explains why there is a lot concentrate on the ECB.
Meanwhile, gold ETFs continue to attract investors, with at least 38 tonnes worth of holdings being added a week ago.
The analyst noted this brings the year-to-date total to 271 tonnes, which is equal to roughly half of global mine production to date in 2016.
Silver investors are also joining in, adding 416 tonnes of holdings in March so far. In the event that pace continues, it’ll mark the largest monthly inflow for silver ETFs since July 2013.