Gold closed in New York at $1,253.90 down from $1,261.40 Wednesday. In Asia this morning, it moved lower to $1,245 and then held there  in London until the LBMA price setting was set at $1,247.25 down from $1,258.25. The dollar index is slightly higher at 97.37 down from 97.17 on Tuesday.

The dollar is up against the euro at $1.0972 from $1.0963 on Wednesday. The gold price in the euro was set at €1,136.76 down from €1,143.83.

Ahead of New York’s opening, the gold price was trading at $1,248.00 and in the euro at €1,137.44.

The silver price closed in New York at $15.31 down 5 cents.  Ahead of New York’s opening the silver price stood at $15.27.

Price Drivers

E.U. Today at 12.45 European time Draghi of the E.C.B. announced more stimulus measures, including a further lowering of interest rates and a boost to the amounts of QE. This has been discounted in the gold price already, with gold’s price threatening the Technical picture now.

But the broad opinion is now that his stimuli will have little impact. We are watching the exchange rate of the euro to the dollar in particular. We have said before that the U.S. does not want to see a strong dollar, particularly against the euro and will not want the dollar index over 100 or the euro lower than $1.05 to $1.07.  Gold slipped sharply on the news, but then picked up again even more strongly.

With governments in the E.U. having done too little, we expected Draghi to give them a mild castigation once more, but it is difficult to see if it is either possible or reasonable to expect him to do much more than he has. Hence we do expect to see the E.U. growth coming under pressure alongside the global economy, which is now in recession. Will we see the “derailment” the IMF has warned about? Standing back and gazing at the big picture, we see little reason to expect growth to be lifted no matter what Draghi does. If he disappoints then we may see the ‘derailment’ soon. The scene remains gold positive!

Gold ETFs There were purchases of 2.081 tonnes of gold into the SPDR gold ETF and purchases of 0.45 of a tonne into the Gold Trust yesterday. The holdings of the SPDR gold ETF are now at 792.820 tonnes and at 191.52 in the Gold Trust. While this was a reasonable level of buying into the two gold ETFs in the U.S. fears of what the market will do after Draghi’s announcement caused dealers to pull prices back.

Because, once again, physical sales were not a feature, we expect the gold price to be volatile today. If the euro does not fall strongly, we expect physical gold buyers to rush back in.

What is clear is that today will become a higher risk day than most.

Silver – The silver price remains on the back foot waiting for gold to go higher.