The fall and subsequent rebound in the dollar price of gold after today’s announcement of additional monetary stimulus from the European Central Bank (ECB) should help to settle the debate over what has been behind the recent improvement in sentiment towards the precious metal. The initially lacklustre response confirms that cuts in interest rates that are already negative (or at least near zero) can only explain a small part of this improvement. Instead, the main drivers have been swings in the US currency, the ebb and flow of safe-haven demand, and, above all, shifts in inflation expectations.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services