ECB Interest Tate Decision and Impact on GOLD
ECB interest rate decision
After Fed Chair Jerome Powell’s hawkish speech on the FOMC interest rate decision last week, which hammered the price of gold down, European Central Bank governor Christine Lagarde blew the same trumpet on Thursday. At first glance, the interest rate decision by the ECB did not bring about any changes, but in your speech you made some long overdue admissions, to which the price of gold also reacted with discounts.
She stated that “the risks to the inflation outlook are pointing to the upside” , while so far the country has been reassured and the high inflation rates have been sold as only “temporary”. She added that the board was “unanimously concerned” about the high inflation figures . Lagarde also noted that inflation is “approaching the ECB’s target” but added that it will not raise rates until net asset purchases have ended . While she said in December that rate hikes in 2022 were “very unlikely ,” she didn’t repeat that statement this time .
The ECB therefore expects prices to continue to rise and is groping its way towards interest rate hikes and an end to bond purchases. If you no longer print money that devalues the purchasing power of the euro, there is no reason to keep gold in your portfolio as a hedge against inflation, at least that is the opinion of many investors. For this reason, short-term speculators reflexively sold gold last week and new buyers held back, which put the price under pressure for a short time.
