Investing.com -- Gold bounced off three-week lows after the European Central Bank stood pat on Thursday, as Mario Draghi emphasized that policymakers need more time to assess the long-term ramifications of the U.K's decision to leave the European Union before deciding whether to implement further easing measures.
On the Comex division of the New York Mercantile Exchange, Gold for August delivery traded between $1,310.50 and $1,332.15 an ounce before settling at $1,331.20, up 11.90 or 0.92% on the session. At session-lows, Gold fell to its lowest level since June 24 when it soared nearly 5% hours after the shocking outcome in the Brexit referendum became official. Despite the recent downturn, Gold is still up by more than $70 an ounce since the decision jolted markets worldwide. More broadly, the precious metal is up by more than 24% since January 1 and is on pace for one of its strongest years over the last decade.
Gold likely gained support at $1,253.70, the low from June 24 and was met with resistance at $1,368.60, the high from July 7.
On Thursday, the ECB's Governing Council left its benchmark interest rate, as well as the pace and duration of its Quantitative Easing program unchanged until it receives more clarity on the implications of Brexit on the euro area economy as a whole. While acknowledging that the U.K.'s decision has provided headwinds to the euro zone's economic outlook, Draghi stressed that the Governing Council could move as soon as September if actions are needed to bolster the economy.
"If warranted to achieve its objective, the Governing Council will act by using all instruments available within its mandate," Draghi said. "I would stress readiness, willingness (and the) ability to do so."
Draghi also downplayed forecasts that the U.K.'s departure could shave off as much as 0.5% in annual GDP growth throughout the euro area, noting that the duration and outcome of negotiations between the parties could take years to settle. The head of the ECB also remarked that financial markets showed "encouraging resilience," during the Post-Brexit period, crediting central bank liquidity and the swap lines they created for helping ensure stability.
The Governing Council's latest rate decision came days before the Federal Open Market Committee (FOMC) meets in Washington next week for its two-day July meeting. As the U.S. labor and housing markets have shown signs of improvement in recent weeks, FOMC participants have appeared split on the timing of its next interest rate hike. The Federal Reserve has held its benchmark interest rate steady at each of its first four meetings this year since raising short-term rates 25 basis points last December.
Any rate hikes by the Fed this year are viewed as bearish for Gold, which struggles to compete with high-yield bearing assets in rising rate periods.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, was relatively flat in U.S. afternoon trading at 97.05 (down 0.11% on the session). Earlier this week, the index surged above 97 for the first time in four months while reaching its highest level since March 10.
Dollar-denominated commodities such as gold become more expensive for foreign investors when the dollar appreciates.
Silver for September delivery gained 0.224 or 1.14% to 19.83 an ounce.
Copper for September delivery inched up 0.005 or 0.22% to 2.259 a pound.