Price of Gold Fundamental Daily Forecast – Rebounding from 16-Month Low as ECB Delivers 50bp Rate Hike

Gold futures are trading lower on Thursday, hovering just above a 16-month low as traders await the European Central Bank’s (ECB) highly anticipated interest rate decision.

For weeks, the ECB has been signaling a 25-basis point interest rate hike at its policy meeting, however, earlier this week, Reuters reported policymakers were going to discuss raising rates as much as 50 basis points.

The prospect of aggressive policy tightening by the ECB and other major central banks is bearish for non-yielding gold.

At 12:24 GMT, December Comex gold futures are at $1706.90, down $10.80 or -0.63%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $158.04, down $1.50 or -0.94%.

European Central Bank Raises Rates by 50 Basis Points, Its First Hike in 11 Years

The European Central Bank (ECB) on Thursday increased interest rates for the first time in 11 years in an attempt to cool rampant inflation in the Euro Zone.

The ECB pushed benchmark rates up by 50 basis points, bringing its deposit rate to 0%.

“The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalization path than signaled at its previous meeting,” the ECB said in a statement.

Daily Forecast

Gold is showing little reaction to the ECB interest rate hike. Two or three months ago a 50 basis point rate hike would have been a bigger deal. It would have been called an extremely hawkish move However, with most major central banks moving rates higher by 50 basis points at a time, a move of this size isn’t considered that hawkish anymore.

My point is that a 50 basis point rate hike is really no big deal in this environment so gold traders may not show that much of a reaction to the news. In fact, prices could even rally over the short-run because the ECB news may have been priced into the market

Technically speaking, the March 30, 3021 main bottom at $1694.50 may be the only support preventing the market from beginning a steep break into the April 1, 2020 main bottom at $1618.00.