Gold prices surged sharply on the back of a weaker dollar, following data showing weakness in labor market but gains were capped as expectations grew that the European Central Bank is moving closer to tightening monetary policy. Following the European Central Bank’s decision to keep interest rates unchanged, ECB president Mario Draghi said that ECB policymakers would likely make a decision on tapering monetary policy in October but did expressed concerns over the sharp rise in the euro.Draghi said that the currency’s strength “represents a source of uncertainty which requires monitoring with regard to its implications for the medium term outlook for price stability”.
The sharp rise in the euro came amid a slump in the dollar following data showing initial jobless claims hit a two-year. Dollar-denominated commodities such as gold are sensitive to moves in the dollar – A dip in the dollar makes gold cheaper for holders of foreign currency and thus, increases demand.
Source: Investing
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