Prices of base and precious metals declined today following the European Central Bank's (ECB) decision to take no action to prevent the deepening Euro zone economic crisis. Traders were expecting some measures in the form of interest rate cut and economic boosters to protect the Euro zone economies.
While copper price settled with a decline of 0.81 per cent at $7,327 a tonne, aluminium and zinc followed suit and fell 0.80 per cent and 0.06 per cent to $1,806 a tonne and $1,807 a tonne, respectively, on the benchmark London Metal Exchange.
Precious metals also joined the race as gold fell 0.61 per cent to trade in early afternoon at the London spot market at $1,596 an oz, while silver followed with a decline of 1.27 per cent to $27.20 an oz.
|Source:LME Data compiled by BS Research Bureau|
"The market was expecting some kind of policy decision from the ECB to take care of the euro crisis. The inacton has disappointed the market," said Naveen Mathur, associate director, Angel Broking.
The ECB had held another meeting yesterday on measures to tackle the debt crisis. However, that too ended on a disappointing note.
Also, there was no announcement on the new policy measures by the bank. The ECB meeting was crucial following the statement issued by its President Mario Draghi that they would take all necessary steps to save the single currency, and had raised expectations among investors.
A report by Kotak Commodity Services said, "Gold came under pressure this week as both the Federal Open Market Committee and the ECB disappointed market players by avoiding any immediate measures to support their economy. However, both these central banks kept the door open for additional measures."
Madhavi Mehta, research analyst at Kotak Commodity Services said, "The ECB has said they might consider bond purchases in the future as well as resort to non-standard measures. This will not work well for gold as the euro will fall against the dollar."
The Dow Jones and S&P 500 Index of the US went down 0.7 per cent to 12,878.9 and 0.7 per cent to 1,365, respectively yesterday. The DAX fell to 2.2 per cent and CAC dropped 2.7 per cent. The euro hit a low of 1.213 against the dollar on Wednesday while the Dollar Index touched a high of around 83.4 the previous day.