Gold seeing little reaction as ECB pumps more liquidity into financial markets, leaves rates unchanged
New York (Dec 10) The gold market is seeing only modest buying interest as it holds near session highs as the European Central Bank left interest rates unchanged Thursday but pumped more liquidity into financial markets.
As expected, Thursday, the ECB announced that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.
Looking past interest rates, the ECB said that it would increase the envelope of the pandemic emergency purchase programme (PEPP) by €500 billion to a total of €1,850 billion. It also extended the horizon for net purchases under the PEPP to at least the end of March 2022.
The new liquidity measures is having a limited impact on gold as the market tries to attract new buying momentum to push prices back above critical resistance at $1,850 an ounce.
February gold futures last traded at $1,840.80 an ounce, up 0.13% on the day.
The increase stimulus measures were also widely expected as ECB President Christine Lagarde said at the last monetary policy meeting that the staff were viewing all its monetary policy tools.
In other measures, the ECB said it decided to extend the reinvestment of principal payments from maturing securities purchased under the PEPP until at least the end of 2023.
In a third announcement, the ECB said it would also recalibrate the conditions of the third series of targeted longer-term refinancing operations (TLTRO III). Specifically, it said that it will extend the period over which considerably more favorable terms will apply by twelve months, to June 2022. Three additional operations will also be conducted between June and December 2021.
The central bank said it would also extend to June 2022 the duration of the set of collateral easing measures adopted by the Governing Council on 7 and 22 April 2020. The extension of these measures will continue to ensure that banks can make full use of the Eurosystem’s liquidity operations, most notably the recalibrated TLTROs.
“The monetary policy measures taken today will contribute to preserving favourable financing conditions over the pandemic period, thereby supporting the flow of credit to all sectors of the economy, underpinning economic activity and safeguarding medium-term price stability,” the central bank said in its monetary policy statement.
“At the same time, uncertainty remains high, including with regard to the dynamics of the pandemic and the timing of vaccine roll-outs,” it added.
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