(Kitco News) - The gold market continues to struggle to attract new bullish momentum with dovish comments from Christine Lagarde, President of the European Central Bank, having little impact on the precious metal.
In a press conference following the ECB's monetary policy decision, Lagarde emphatically stated the central bank's commitment to achieving its new inflation target of symmetrical inflation of 2%.
"In support of our symmetric 2% inflation target and in line with our monetary policy strategy, the Governing Council expects the key ECB interest rates to remain at their present or lower levels until we see inflation reaching 2% well ahead of the end of our projection horizon and durably for the rest of the projection horizon, and we judge that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at 2% over the medium term," she said in her opening statement.
Lagarde noted that the central bank's interest rate is at the lower bound. "So we have to respond forcefully and persistently. If we are determined, we will reach our 2% target," she said during the question and answer portion of the press conference.
Lagarde's comments come after the ECB announced that it would keep the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25%, and -0.50%, respectively.
In its monetary policy statement, the central bank reiterated that the Governing Council expects asset purchases under the Pandemic emergency purchase programme (PEPP) over the current quarter to be conducted at a significantly higher pace than during the first months of the year.
The gold market is seeing little bullish momentum even as the ECB signals that interest rates will remain at the lower bound for the foreseeable future. August gold futures last traded at $1,801 an ounce, roughly unchanged on the day.
The ECB's new stance on inflation comes as it sees a further recovery of the European economy. Lagarde noted that risks to economic growth are broadly balanced; however, she also added there is a long way to go in the recovery.
"We expect economic activity to return to its pre-crisis level in the first quarter of next year. But there is still a long way to go before the damage to the economy caused by the pandemic is offset," she said. "Overall, there are still 3.3 million fewer people employed than before the pandemic, especially among the younger and lower-skilled."
Lagarde said that the ECB is taking a patient approach to monetary policy as they don't want to tighten prematurely and put the economic recovery at risk.
Gold price can't catch a break even as ECB signals lower interest rates for longer - Kitco NEWS
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