Investing.com -- Gold closed sharply higher on a volatile day of trading, as European Central Bank president Mario Draghi rattled global markets with conflicting remarks after exceeding market expectations by unveiling a wide range of easing measures on Thursday.
On the Comex division of the New York Mercantile Exchange, gold for April delivery traded in a broad range between $1,237.80 and $1,274.20 an ounce before settling at $1,273.80, up 16.40 or 1.32% on the session. At session lows, gold fell to its lowest level in a week before rebounding following Draghi's comments. With Thursday's rally, gold halted a brief three-day losing streak. The precious metal remained near 13-month highs hit last week. Gold is still on pace for one of its strongest opening quarters in the last 30 years.
Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,284.70, the high from Feb. 3, 2015.
As expected, the European Central Bank's Governing Council approved a comprehensive set of easing initiatives on Thursday aimed at boosting economic growth throughout the euro zone and staving off deflation. The Governing Council used nearly all of the tools at its disposal to stimulate the economy by lowering three key rates at the meeting and extending the breadth and depth of its comprehensive Quantitative Easing program. As a result, gold slumped to session-lows when the euro plunged more than 1.5% against the dollar and major euro area equity markets surged by at least 2%.
As part of its updated policy, the ECB lowered its deposit rate deeper into negative territory by reducing it by 0.1 to Minus-0.4%. The Governing Council also cut its marginal lending rate by 0.05 to 0.25% and its refinance rate by 0.05% to zero. At the same time, the central bank increased the size of monthly purchases with its bond-buying program by €20 billion to 80 billion a month and extended the program by several months through March, 2017.
In addition, the ECB introduced a new series of Long Term Refinancing Operations (LTROs) and announced that it will be purchasing non-financial corporate debt issued by companies established in the euro zone. While Draghi noted that he expects rates to remain low through the completion of the asset purchasing program, he emphasized at a press conference on Thursday that he doesn't see a need to cut rates any further.
"In taking into the account the measures to grow and return to our price stability objective we do not anticipate that it will be necessary to reduce further rates," Draghi said. "Of course new facts can change the outcome."
The comments triggered a reversal in markets worldwide, as EUR/USD soared to an intraday high of 1.1194 and gold turned positive for the session. The dovish actions from the ECB could compel the Federal Reserve to delay the current pace of its tightening cycle when it meets again next week.
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 environments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged to 98.42 following the release of the Monetary Policy statement, before falling sharply to 96.09 in U.S. afternoon trading. The index, which is down more than 1% over the last two months, fell to fresh three-and-a-half-week lows on Thursday.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for March delivery gained 0.220 or 1.43% to 15.575 an ounce.
Copper for March delivery fell 0.012 or 0.56% to 2.220 a pound.
In overnight trading, China reported that its Consumer Price Index (CPI) rose by 2.3% in February, considerably above expectations for a 1.9% increase. China is the world's largest consumer of copper, accounting for approximately 45% of the world's total.