Rates are going down and Russia’s stockpiling — gold glistens

The European Central Bank has again raised the spectre of reducing rates as the RBA set a ‘lower for longer’ agenda — so gold’s looking pretty good.

Despite futures finishing the session down 0.6 percent at $US1,414 ($A2,033) an ounce on positive US data, the scene has been set for continuing strength in the gold price — particularly against the Euro and Australian dollar.

According to Dow Jones reporting, European Central Bank chief Mario Draghi once again called for the bank to do more the reverse flagging growth.

READ: Draghi anything but a drag on gold prices

The economic outlook “is getting worse and worse,” especially in manufacturing, Draghi was quoted as saying at a press conference on Thursday.

“Basically we don’t like what we see on the inflation front.”

The ECB said it had asked staff committees to examine policy options including the possible design of a new bond-buying program.

The ECB’s next policy meeting is on September 12. “It now increasingly looks as if the September meeting will not only bring a single measure but rather a package of several measures,” analysts at ING Bank said.

Perhaps not surprisingly, the Euro hit a two-year low overnight on the prospect of stimulus from the central bank.

Chart from xe.com

Meanwhile, the Australian dollar made similar moves yesterday after RBA chair Phillip Lowe said it was likely that low rates would be the new normal.

“On current projections, it will be some time before inflation is comfortably back within the target range,” Lowe said in Sydney, according to Reuters.

“Whether or not further monetary easing is needed, it is reasonable to expect an extended period of low interest rates.”

Chart from xe.com

The main exchange of gold and gold futures, the COMEX market, settles trades in USD — meaning gold will get a lift for those already holding gold and hoping to convert to Australian or Euro dollars.

Lower interest rates also make ‘less risky’ assets such as bonds less attractive, with gold seen as a good alternative.

READ: Why lower interest rates are great for gold

In other gold news, Russia is now holding $100 billion in gold — according to state-backed RT News.

June’s gold purchases brought Russia’s gold reserves to a total of 2,208 tons, according to the latest data released by the Central Bank of Russia (CBR).

This meant Russia was sitting on a mountain of gold valued at $100,277.6 million as of July 1, the CBR report shows.

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