The coming weeks will undoubtedly prove rather interesting for the god market. Several factors are at play once again, and the ECB may be the institution to watch. If more stimulus measures are announced, anything can happen.
More Stimulus by the ECB?
Europe is not a good place to be in during the coronavirus pandemic. Multiple countries note an overall increase in infections, imposing travel restrictions on regions such as Spain and France. Additionally, the European economy is still in shambles, and unemployment rates remain a very real concern. None of this will be resolved out of the blue either.
Instead, it appears the ECB will need to introduce even more stimulus. A decision on this front is expected to be made in the coming week and a half. If more stimulus is introduced, it will certainly influence the gold market in many different ways. This is very different from the US, where economic data has seemingly begun to improve ever so slightly.
In Europe, however, things are looking very bleak indeed. It is now up to the ECB to get inflation going, either for better or worse. Overdoing it will cripple the European economy even further. Not doing enough will equally create various problems that may lead to introducing even more stimulus in the future.
Some may wonder why lowering interest rates is not an option. Contrary to the United States, Europe’s interest rates are already in the negative. Lowering them even further will serve no purpose whatsoever, and even make things worse. Relying on stimulus is the only option at this point, as it is the lesser of two evils.
Can the Gold Market Bounce Back?
Following a week of sideways momentum, the future of the gold market remains in question. As the US Dollar continues to show resilience, there is no real recovery in sight for precious metals. At the same time, one has to wonder how long the US Dollar can depict this current momentum. There are still a lot of unknown factors waiting to be addressed before things can begin to return to normal.
For the time being, it is likely the gold market will continue to bounce between $1,920 and $2,000. Whether that is a good or bad thing, is a matter of debate. Not losing ground rapidly is a strong signal, but the inability to continue the uptrend isn’t too encouraging either. Next week may prove interesting for the gold market, although it remains to be seen if the ECB takes a decisive course of action.