ECB's Draghi Undercuts the Euro

Over the last few weeks, the Euro has benefitted from growing concerns over the fiscal health of the US. The current grossly misnamed "fiscal cliff" talks have allowed money flows to make their way back into the common currency at the expense of the US Dollar.

That has changed in today's session. ECB President Mario Draghi's comments at a press conference have been interpretted as quite dovish by the trading community. Even though the ECB kept interested rates unchanged, the talk in the market quickly moved in response to what many feel was Draghi's leaving the door open for rate cuts in the not-too-distant future. What this means is that the interest rate environment in the Eurozone will remain negative in real terms. This is the type of scenario in which gold thrives.

While Goldman's report from yesterday pronounced an end of the negative real interest rate environment in the US sometime late next year or early in 2014 (something which I strongly disagree with by the way as higher interest rates will crush this economy), Draghi's comments seem to have paved the way for the continuation of such over in the Euro Zone for teh foreseeable future.

The result can be seen in the EuroGold chart which has experienced a nice bounce even as the Euro itself has come under some strong selling pressure here in the US session.