Gold finds support as ECB keeps rates steady amid inflation risks

Spot gold last traded at €3,619.95 per ounce, marking a 0.75% decline for the session. While the metal is struggling against the greenback, currently hovering near the $4,000 support level, it is demonstrating relative resilience against the euro. Market analysts suggest that sentiment may be shifting as central banks struggle to outpace the rapid rise in inflation. If price pressures accelerate beyond interest rate hikes, real rates could decline, potentially lowering the opportunity costs for holding non-yielding assets like gold.

Naeem Aslam, CIO of Zaye Capital Markets, notes that the ECB faces a precarious balancing act. The bank is signaling rising inflation risks while simultaneously attempting to avoid destabilizing sovereign bond markets. According to Aslam, the euro currently carries both an energy-inflation premium and a policy-credibility discount. Until the ECB can effectively address energy costs without triggering bond market instability, each warning on inflation may paradoxically serve as a catalyst for further euro selling.