By James Chen
Though the European Central Bank (ECB) announced its decision on Thursday to leave its monetary policy unchanged, as expected, it is still widely anticipated that the central bank will soon be in the position to extend its easing programs further. Meanwhile, the long-awaited 2nd rate hike in ten years by the US Federal Reserve has still failed to materialize, and may well have hit a further snag after a series of relatively weak US economic data releases within the past week.
If this ‘lower-for-longer’ global trend continues with respect to interest rates, as appears likely, one of the primary assets that would clearly be in the position to benefit the most is non-interest-bearing, dollar-denominated gold. In a prolonged low-interest-rate global environment, particularly if the US dollar is also pressured as a result, the appeal of gold generally rises.
Such a rise has been manifested for the past several months with the price of gold making a steady recovery from the $1050-area multi-year lows of late last year. This recovery has formed a rough parallel uptrend channel on the charts, which has framed the precious metal’s general bullishness within the past nine months.