Marex Spectron Bullion Thoughts

Another day of dollar watching, with gold moving slowly higher in the afternoon as the greenback slipped lower. Good figures from the US earlier were soon forgotten as a long dollar market got bored and squared up. Volumes were good on the exchange for gold, but my personal belief is that this is down to the proliferation of algorithmic and high frequency trading programmes, which are all intrinsically linked to bond, stock and currency markets, rather than an outbreak of fresh interest in the gold market.

Today the gold market will once again take a backseat as the euro takes centre stage. The ECB governing council meets today in Frankfurt to discuss plans to potentially cut back on its 2 trillion euro stimulus programme.

At the moment, the bank is buying 60 billion euros worth of mainly government bonds each month and the consensus view for today is that Draghi will announce a reduction in this to around 30 billion and also announce a time frame of when this will finish. Whatever happens the euro will be very jumpy in the run up to this and will no doubt have a large move at 12:45 London time when the announcement is made. Will this impact the gold price? It shouldn’t, but as I mentioned earlier, the programme traders will probably move it slightly. 

Draghi then has a press conference afterwards which will ensure further silly moves in the currency for an hour or so. We also have Initial Jobless Claims from the US at 13:30 London time. As I say, it will be a currency day, but of course this will impact gold if the dollar moves vs the rest. Trade accordingly.