ECB Lifts Dividend Restrictions, Gold Likely To See Higher Volatility

European banks are likely to remain in the spotlight today as the ECB has lifted the dividend ban. This move by the ECB sends a strong signal to the market that the ECB is comfortable with its balance sheets. However, the ECB hasn’t given them a completely free ride as well; it wants to make sure that there are some checks in place, and hence it has asked the banks to keep their dividend and share repurchase program to less than 15% of profit for 2019 and 2020. We are expecting the banks to perform well today as fresh capital is likely to flow.

There is still some optimism in the market about the second stimulus package, and investors believe that they may get good news. Mitch McConnel, Senate Majority Leader’s comment has boosted the optimism among investors. Yesterday, he said that he intends to keep the lawmaker in Washington until they reach a deal.

In terms of the price, the precious metal is holding on to its gains, and the hope is that it will continue to move higher. Today is going to be the most volatile day for the gold price for this week. Today’s events are likely to set the precious metal tone for the rest of the year. Firstly, it is the US  that it is likely to move the dollar, and the expectations are that this number isn’t going to be impressive. Then you have the Fed later in the afternoon, during which we will hear the Fed’s view about the US economy. One thing is pretty clear that the Fed is going to send another strong message to the lawmakers that the US economy needs help, and without this, the economic recovery is likely to remain uneven.

If the Fed sound optimistic about the economy and there is a hint of a small hawkish tone in their tone, we may see the gold price retracing. However, it is also important to keep in mind that the Fed isn’t likely to touch their interest rate anytime soon. It is the forward guidance that matters the most, and that is going to influence the prices.

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