Gold surges ahead of the BoE and ECB rate decisions
Gold inclined today after starting the session in Asia ahead of the Bank of England rate and the European Central Bank rate decisions, where investors flee to gold as a hedge against uncertainty, awaiting the steps taken by policy makers to quell jitters and rising debt woes, especially after the slowing pace of growth and the faltering recovery in Europe as a whole and in the United Kingdom also.
Gold advanced today after opening the Asian session at $1640.87 per ounce, extending the gains recorded yesterday. The metal recorded a high of $1650.35 per ounce and a low of $1634.60, and is trading now around $1645.35 an ounce.
Moreover, the inverse relationship between the U.S. dollar and gold is obvious, and as we explained through our previous reports during the week that gold is trading against the dollar, which forced the metal to trade as a normal commodity and lose the appeal as a safe haven after CME group raised margin requirement on the metal’s futures to control the rapid incline seen before.
Europe is still the main focus in the market, with all eyes concentrated on the rates decision today from central banks, as we expect the European Central Bank to leave rates unchanged at 1.5%, despite speculations in the market for at least quarter percentage point cut to stimulate growth; however, and especially as inflation rose to 3%, the Governing Council could vote to leave rate steady and any cuts are ruled out, yet the bank could use other appropriate tools to stimulate growth especially when lawmakers in Europe have finally found common ground and agreed on the expanded powers of the European Financial Stability Facility.
On the other hand, the Bank of England Monetary Policy Committee faces a critical decision today, where the bank is expected to leave rates unchanged at 0.5%, the lowest record ever, to stimulate growth especially after gross domestic product figures yesterday showed that the economy slightly expanded by 0.1% revised lower from 0.2%, where the expansion is narrowing by time and could reverse any time to contraction unless the Bank finds appropriate solution for the crisis in England, where the country also suffers from high inflation, which rose rapidly this year and almost reached 5%, which also pressured the Bank of England to delay expanding the quantity of Assets Purchasing Program (APF).
However, the Bank is expected to ignore rising inflation as policy makers expects inflation to retreat over the medium term (through the coming two years), yet it’s early to apply further monetary easing measures this month, though the majority of the MPC could vote to expand the APF in the November meeting.
Gold could fluctuate heavily today and will be very volatile and could reverse lower as the U.S. dollar gains momentum against the euro, the sterling pound, the Swiss franc and the Canadian dollar, awaiting the decision from central banks in addition to the unemployed claims in the world’s largest economy, in attempts to speculate what the jobs report could bring tomorrow.
Silver fluctuated today after opening the session at $30.40 per ounce, and recorded the highest at $30.84 and the lowest at $30.20 and is currently trading around the opening level at $30.42 an ounce. Among other precious metal, platinum set the lowest level today since January 2010 at $1472.13 an ounce, after reaching a high of $1505.25. The metal opened the session at $1492.50 an ounce and trades now around $1492.75.
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