World gold prices continue to face strong downward pressure as major central banks maintain a cautious stance in the face of rising inflation risks due to rising energy prices. In the latest developments, the European Central Bank (ECB) has become the next major central bank to decide to keep interest rates unchanged, strengthening expectations that global monetary policy will maintain a tighter state longer than expected.
In the decision predicted by the market, the ECB kept deposit interest rates unchanged at 2.00%, the main refinancing rate at 2.15% and the marginal lending rate at 2.40%.
According to the ECB, the conflict in the Middle East, especially related to Iran, is creating a significant level of incertitude for global economic prospects, while increasing the risk of inflation while growth prospects are weakening.
In its monetary policy statement, the ECB said that rising energy prices will directly impact inflation in the short term. The medium-term impact will depend on the duration of the conflict and the spread of energy prices to consumer costs and economic activity.
This will have a significant impact on inflation in the short term through higher energy prices. The medium-term impact depends on the intensity and duration of the conflict as well as how energy prices affect the economy," the ECB said, while affirming that the Governing Body is still capable of navigating current risks.
However, the gold market almost did not react positively to information from the ECB. Spot gold prices continued to fall deeply, reflecting widespread selling pressure on the precious metals market.
Calculated in Euro terms, spot gold price decreased by nearly 6%, to about 3,790.59 euros/ounce. On the international market, gold prices also decreased by more than 5%, to about 4,365.36 USD/ounce.
According to the latest economic forecasts, the ECB has adjusted to increase inflation expectations while lowering the eurozone's economic growth outlook.
The ECB forecasts average inflation to reach 2.6% in 2026, 2.0% in 2027 and 2.1% in 2028. Compared to the previous December forecast, the adjustment increase mainly stems from higher energy prices due to the impact of the Middle East conflict.
In the opposite direction, the growth outlook was adjusted downwards. The ECB forecasts that the Eurozone economy will only grow by about 0.9% in 2026, before recovering to 1.3% in 2027 and 1.4% in 2028.
According to the ECB, the adjustment to reduce growth reflects the spillover effect of conflict on the commodity market, people's real income and economic confidence. In that context, the prospect of maintaining interest rates at a higher level for longer continues to put pressure on gold prices - a non-interest-generating asset in the short term, although geopolitical risks are still a factor supporting the precious metal in the long term.
