Spain’s developing story and its effect on precious metals

The European Central Bank left interest rates unchanged today as President Mario Draghi awaits to see if Spain does indeed ask for help before the weekend.  The Iberian country is still deliberating on it if wants to take up the ECB’s offer, and the conditions associated with it, to buy Spain’s bonds.  While this is a developing story over the next few days regarding Spain, President Draghi did say at the conference that the ECB’s aggressive bond-buying plan has eased credit tensions.  He further elaborated by stating that it is up to politicians in beleaguered euro-zone countries (hint hint Spain) to pull the trigger and ask for assistance.  The euro has reacted positively to Draghi’s comments and has broken out of its recent consolidation around 1.29.  So far the currency is capped at the psychological area of 1.3 and this should provide decent short term resistance.

The precious metals markets were quiet during the Asian session but were brought to life in the late European / early NY session on the heels of the ECB announcement. Gold took its cue from the euro and is fighting to stay above the significant figure of $1,790.  While gold has approached and briefly broken through this level three times in the last two weeks, it has yet to close above it.  It is a particularly important area because it represents the previous high from 2012, a figure it hasn’t touched since late February.  If a close above $1,790 can be achieved, next major technical resistance awaits at $1,820.