Bank of America Merrill Lynch (BoAML) says the European Central Bank’s (ECB) decision to move aggressively in government bond purchases won’t likely impact gold. During its Jan. 22 meeting, the ECB signaled to the market that it will be fighting against growing deflationary risks. “While we acknowledge that gold has featured more highly on investors’ radar screen as of late, there has been some apprehension over the impact the recent ECB easing may have on gold quotations,” BoAML says in its research note Monday. “An increase in central bank action is often seen as bullish by gold market participants. Yet, we believe the impact of a more pro-active ECB on gold is somewhat ambiguous this time around for several reasons. Most notably perhaps, there is limited risk that peripheral spreads will blow out again (rising spreads were very bullish for gold at the height of the Eurozone crisis), while USD may be pushed higher further.”
