European Central Bank president Mario Draghi has given gold yet another shot in the arm, saying the bank is more likely to add more stimulus into the continent’s economy than not.
Gold rose to $US1,352 an ounce ($A1,966) in overnight trading as a speech given by Draghi added to sentiment that the US Federal Reserve should give a signal about cutting rates when it meets soon.
Giving an outlook speech, Draghi said the bank’s intention in the absence of more positive economic data would be to add stimulus to the economy to get the continent’s inflation rate closer to 2 percent — but he didn’t say what form this stimulus would take.
“Looking forward, the risk outlook remains tilted to the downside, and indicators for the coming quarters point to lingering softness,” he said.
“The risks that have been prominent throughout the past year, in particular geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets have not dissipated.
“In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required.”
One possible route to stimulus would be to lower the cash rate, which would also mean bonds would be affected — sending yields lower.
For example, the Financial Times noted that German 10-year bonds hit an all-time low and their Italian equivalents hit their lowest level in a year.
It meant that investors were keen to pile into gold, which sent the price higher overnight.
ASX-listed small cap companies with an exposure to gold include:
Antipa Minerals (ASX:AZY), Blaze International (ASX:BLZ), Carawine Resources (ASX:CWX), DeGrey Mining (ASX:DEG), Lefroy Exploration (ASX:LEX), Moho Resources (ASX:MOH), Norwest Minerals (ASX:NWM), and Sultan Resources (ASX:SLZ).
Star Investing has a commercial partnership with some companies mentioned in this article. This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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