Gold reacted positively to Germany’s high court ruling that paves the way for the European Central Bank to move forward on its bond buying program.
Ahead of Germany’s court ruling on the constitutionality of the European Stability Mechanism (ESM), the euro is trading at a level against the U.S. dollar not seen since late May this year.
Gold prices are basically flat in the first morning of trading this week. On Friday gold bugs cheered as price moved to a level not seen since February after the disappointing U.S. non-Farm Payroll results.
In the run up to European Central Bank President Mario Draghi’s speech, gold bugs saw the price of gold (GLD, quote) climb as high as $1,716.90. Unfortunately, the price move was dampened in the wake of the actual event. Yes, the rumors of bond buying was confirmed in a move described as an “outright monetary transaction” plan with the ECB’s reiteration that the euro zone’s recuse funds “should” be used to participate in bond markets.
Energy traders began the European session with caution thanks to growing anxiety over the global economic landscape.
Emerging markets in Asia last night were under pressure after U.S. markets fell on weaker than expected manufacturing data. Commodity prices continue to move lower ahead of the European Central Bank meeting and Non-Farm Payroll report tomorrow and Friday respectively.
Weak U.S. manufacturing data could be good news for gold bugs, having now officially contracted for the third month in a row and flaring up speculation that the FOMC will initiate another round of quantitative easing (QE3) at the next scheduled meeting.
The EUR/USD moved lower as traders jockeyed positions ahead of the ECB and FOMC meetings this week and next.
Overnight emerging markets came under pressure from the eurozone as rating agency Moody’s downgraded the European Union’s outlook.