It appears the European Central Bank (ECB) is running out of ammunition to fight an economic slowdown in the Eurozone. Despite the ECB cutting interest rates to historic lows and pledging to purchase corporate bonds from banks in an attempt to stimulate lending, it appears Europe may slip into recession.

The slowdown is putting pressure on the ECB to introduce a full blown quantitative easing program, however, Germany stands in the way. The Germans are against the ECB buying sovereign debt from member states as this would reduce the pressure on them to put their finances in order.

An ECB program of sovereign bond purchases would inject even more cheap credit into the financial system in hope of simulating spending and producing inflation. Quantitative easing would also lower the value of the Euro and boost exports from the region.

Loose monetary policy in the form of quantitative easing is bullish for gold.

If the Eurozone economy continues to contract ECB President, Mario Draghi, will be under mounting pressure to defy the Germans and loosen monetary policy even further.