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Euro Gold Jumps 2% to 21-Month Highs as ECB Launches "Meaningful" QE of €60bn Per Month, Dollar Gold Over $1300

EURO GOLD prices jumped to 21-month highs on Thursday, leaping above €1130 per ounce as the single currency sank on the FX market following the announcement of QE government-bond purchases by the European Central Bank.
 
ECB president Mario Draghi said this buying – plus the asset-backed securities purchases first announced in September and begun in October – means "combined monthly purchases of public and private sector securities will amount to €60 billion until end-September 2016.
 
"[They] will in any case be conducted until we see a sustained adjustment in the path of inflation...below, but close to, 2% over the medium term."
 
That €60bn sum beats the €50bn figure leaked by unnamed ECB staff on Wednesday.
 
Although the ECB will target only government bonds rated to be "investment grade", thereby excluding those from Greece – where the anti-austerity Syriza party, which wants to cancel some debt or quit the Eurozone, is likely to take power after next Sunday's election – Draghi said that "additional eligibility criteria will be applied" for countries currently subject to EU/IMF support.
 
Euro gold prices added 2.0% inside 30 minutes, while the single currency sank below $1.15 to the Dollar, but failed to break below last week's new 9-year low.
 
Gold priced in Dollars meantime touched $1300 per ounce, a 5-month high when first reached Wednesday morning, before edging back.
 
Eurozone stock markets also rose, erasing earlier losses, as weaker Eurozone government bond prices pushed higher, taking 10-year yields Italian down to record lows of 1.63%.
 
Intended to help add €1 trillion of investments to the ECB's balancesheet, the ABS program launched in 2014 has to date spent only €2.1 billion, Bloomberg noted this week.
 
Today's ECB press release kept interest rates unchanged – meaning a negative 0.20% per year on reserve deposits – and said "further monetary policy measures [would] be communicated by the President" at his press conference, scheduled for 45 minutes later.
 
In his speech – delayed by 10 minues, apparently by elevator trouble in the ECB's new €1.4bn headquarters, planned in 1999, begun in 2011, and occupied for the first time in November – Mario Draghi began by referring to the full details, which would be posted on the ECB's website another hour later.
 
The text of Draghi's opening remarks wasn't posted to the internet until 14:51 CET, more than 20 minutes behind schedule.
 
"The overall amount and the monthly flows [of new ECB QE] are quite meaningful," Draghi said in the question and answer session following his statement.
 
Euro gold prices have twice peaked near €1380 per ounce, first in September 2011 and again 12 months later as weaker Eurozone government bond yields soared on fears the currency zone would break up amid debt defaults by weaker member states Portugal, Ireland, Greece, Spain and perhaps even Italy, the union's third largest economy.
 
Gold priced in the Euro turned lower in September 2012 on the day Mario Draghi vowed to do "whatever it takes" to maintain the union, widely taken to mean QE bond-buying was an option.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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