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Since the ECB's interest rate decision, the price of gold has already risen by 2.5%. At the time of writing, the price is almost €34,000 per kilo, which is more than €1,050 per troy ounce. The rise in prices can be explained almost entirely by the depreciation of the euro, because in dollar terms the price of gold rose by only 0.1%. Silver Price to almost €460 per kilo, the highest level in more than three months.
Precious metals appear to offer good protection against a depreciation of the currency. A weaker euro reduces the purchasing power of savings in this currency, but it increases the purchasing power of gold and silver. If, on the other hand, the euro becomes stronger, we see the opposite effect. By holding part of your assets in precious metals, you can protect your savings against currency risk.
Commenting on the interest rate decision , ECB President Draghi said there are options to adjust the duration, size and composition of the stimulus programme. The central bank will not evaluate the bond-buying programme until December, but the market is already anticipating a further expansion of the €60 billion per month asset purchase programme. On the foreign exchange market, the euro fell sharply, as the exchange rate against the dollar fell from $1.13 to $1.11.
ECB interest rate decision pushes euro sharply lower (Chart from Yahoo Finance)
Draghi said that the central bank says it aims for inflation close to 2% in the medium term. This is despite the fact that inflation in the eurozone is currently in danger of turning into deflation as a result of falling commodity prices and falling oil prices. And that, according to Draghi, is very undesirable, because it makes it more difficult to pay off debts.
