Draghi's Dovish Stance Pressured Gold
ECB’s dovish stance
On Thursday, January 21, the dovish sentiment from the European Central Bank (or ECB) pulled the euro lower compared to the US dollar. The dollar rose to its highest point in the past few weeks against the euro, and the dollar’s strength weighed gold down.
The Japanese yen, which is another haven asset, also fell. Another important link between gold and the dollar is the price of crude oil. The sudden foundation that the US dollar gained supported the downward sticky oil prices and lifted them higher after numerous rough sessions.
The rise of oil markets helped the overall market sentiment, allowing stocks to rebound as well. The growth in other assets curbed gold’s safe haven appeal and pulled it lower.
Trading range
Gold prices had gained nearly $25 during the previous day’s carnage-filled trading, which sent investors scrambling for safety. The Asian market’s demands were also curbed as the buying season is coming to an end. Gold has maintained a trading range, but not a narrow one. Gold futures for February expiry varied between $1,065–$1,110 per ounce. Gold is swinging between gains and losses, rightly taking its prices from the market sentiments and risk-aversion requirements of the investors.
Gold has maintained a trading range, but not a narrow one. Gold futures for February expiry varied between $1,065–$,1110 per ounce. Gold is swinging between gains and losses, taking into account the prices of market sentiments and investors’ requirements for risk aversion.
The rise and fall in gold contributed to losses for most mining-based ETFs like the Market Vectors Gold Miners ETF (GDX) and the Market Vectors Junior Gold Miners ETF (GDXJ). Both indicators have lost 5.1% and 6.8%, respectively, on a five-day trailing basis.
During the past five trading days starting on January 21, the biggest losers among the mining stocks were Yaman Gold Inc. (AUY), IamGold Corp. (IAG), and Almos Gold Inc. (AGI). These three stocks declined 20.8%, 18.5%, and 22.1%, respectively, on a five-day trailing basis. Together, these stocks make up 5.8% of the GDX ETF.
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