The wholesale-market gold price leapt more than 1% inside an hour in London trade Thursday morning, setting three-week highs above $1620 per ounce after European Central Bank chief Mario Draghi said "The ECB is ready to do whatever it takes to preserve" the single euro currency.
"And believe me, it will be enough."
Speaking in London one day after the gold price jumped following fresh rumors of more quantitative easing by the US Federal Reserve, Draghi did not specify plans, but did point to the high bond yields now being paid by euro-zone members such as Italy and Spain.
"To the extent that the size of these sovereign premia hamper the functioning of the monetary policy transmission channel, they come within our mandate," said the ECB president.
"We have to cope with the financial fragmentation, address these issues."
Spanish bond yields retreated as debt prices rose today, while euro-zone stock markets jumped more than 1%.
The euro currency leapt 1.5¢ within minutes of Draghi's comments, knocking the gold price in Euros back below €42,500 per kilo – the five-month high broken earlier on Thursday.
Gold still held just 4%, however, off September 2011's all-time euro high.
"It's not obvious central banks have been effective, but they're going to keep trying," says John Stopford at the $98 billion UK asset manager, Investec, speaking to Bloomberg.
"Gold has shown itself sensitive to monetary policy announcements this year and any indication of further easing would buoy gold prices," says HSBC precious metals analyst James Steel, looking ahead to Friday's release of second-quarter US economic growth data.
"Gold has been the ultimate wealth preserver for millennia while currencies have tended to have shorter lives," write JPMorgan analysts John Bridges and Shwetabh Shrivastava in a new report on the mining sector.
However, "In the short term declining inflation rates are not consistent with the case that previous monetary stimulus will drive gold prices higher," they add.
"While we wait, investor confidence [in gold mining equities] is under pressure."
After failing to follow gold's sharp rise on Wednesday, silver prices also jumped today, hitting a 3-week high at $27.90 per ounce as industrial commodities including platinum also rose.
"We remain gloomy on the euro crisis," says a new report from Citigroup's chief economist – and former Bank of England policymaker – Willem Buiter today, forecasting a 90% chance of Greece quitting the 17-nation euro zone by end-2013.
Those odds have been raised from Citi's previous forecast of a 50-75% shot.
Picking up German magazine Speigel's weekend claim that the International Monetary Fund won't provide further aid to Greece once the euro zone's own permanent funding is in place, Citi's report also follows a move by the Moody's rating agency to put German, Dutch and Luxembourg debt on "negative outlook" by forecasting downgrades to all European sovereign states, including the UK.
The gold price in sterling whipped violently as the euro currency jumped and the dollar fell, eventually trading unchanged by lunchtime in London at £1,035 per ounce – back where it stood when the Bank of England announced another £50 billion injection of quantitative easing three weeks ago.
"We might see a bit more selling if the gold price stays above $1,605 an ounce," warned a Singapore-based dealer to Reuters overnight, with other Asian traders reporting a rise in scrap supply after Wednesday's 1.5% jump.
But "physical buying has been supportive over the past week," says a report from Standard Bank, and "Indian buying has also begun to show signs of improving.
"Seasonally, Indian demand for physical gold usually picks up in August ahead of the wedding season. Gold futures market participants in India are already anticipated this, as seen in their positioning."