Gold prices fell on Thursday amid the dollar’s strength, where the U.S. dollar strengthened despite the ECB’s announcement of more monetary easing, as the European Central Bank cut the benchmark interest rates by 25 basis points to 1.00% in line with forecasts and announced more nonstandard measures to ease tensions surrounding the European debt crisis. Nonetheless, the ECB stopped short from signaling quantitative easing, which weighed down on confidence ahead of the EU summit on Friday.
Moreover, pessimism started to spread through markets ahead of the EU summit, where investors are starting to doubt the ability of EU leaders to come up with a resolution to the debt crisis. Accordingly, investors targeted lower yielding assets including the U.S. dollar, which put gold prices under strong pressure.
Traders will continue to monitor the developments from Europe regarding the debt crisis, where the focus will turn to the EU summit on Friday, and whether EU leaders will be able to craft a solution to the debt crisis in Europe.
Accordingly, we still expect volatility to continue to dominate gold prices on Friday, but overall, gold prices could extend the losses amid mounting speculations that EU leaders will fail to agree on a plan to resolve the debt crisis, and if that proves to be the case, investors are likely to target the U.S. dollar as a safe haven, which could put gold prices under more pressure.
Originally posted here
