Precious metals improve on the back of ecb rate cut

Photo: Anthony Joh

Precious metals enjoyed a short-term lift on the back of the European Central Bank's announcement of further stimulus efforts.

The ECB announced that it will cut rates by 10 basis points to -0.30 per cent from 9th December 2015, with quantitative easing extended to March 2017 - and even further beyond that date, if necessary.

The move was less severe than expected, causing the euro to surge against the dollar in its best performing month since 2009. At the same time, precious metals also rose on Thursday. Gold futures climbed 0.7 per cent to $1,061.20 a troy ounce on the New York Comex, largely fuelled by the fact that the precious metal is traded in dollar, so any weakness against other currencies makes the asset less expensive.

"Gold rallied off the dollar breaking," Charles Nedoss, a senior market strategist with Lasalle Futures, told Nasdaq.

"I would attribute most of the rally to the weakness in the US dollar," agreed Bill O'Neill, co-founder of commodities investment firm Logic Advisors, talking to News.com.au.

Today, the markets are waiting to see the latest US employment figures, which will prove decisive in the Federal Reserve's decision whether to hike interest rates as soon as this month. If the rates rise, the dollar is expected to climb, which would be bad news for gold's price.

However, it is a question of when, rather than if, this will happen, so the precious metal is expected to continue its downturn trend in the long-term, despite this week's short-term spike.

Silver and platinum also rose, u[ 0.7 per cent from a six-year low to $US14.12 an ounce and up 1.3 per cent from a seven-year low to $US841.49 an ounce respectively.