Markets

Gold higher again as Bank of England joins the loosening craze

A couple of hours into US trading spot gold was US$6 higher at US$1,363
picture of Bank of England
BoE cuts rates for first time in seven years

Gold rose again as the Bank of England became the latest central bank to loosen its monetary policy still further.

The UK central bank reduced its main interest rate by 25 basis points to 0.25%, their lowest since 1694 and the first change since March 2009.

There was also a further £60bn added to the bank’s bond purchase programme.

Looser monetary policy was cited yesterday by the World Gold Council as a reason for the surge in investment demand this year that has helped push the metal back up to three-year highs.

Some commentators suggest this may mean gold going as high as US$1,800 per oz, but there was a voice of caution today in the shape of RBC.

The Canadian bank sees an average annual gold price of $1,258 an ounce this year and $1,241 an ounce in 2017.

It says the rally has stemmed almost entirely by investor demand, in the form of exchange-traded product demand and futures positioning.

“Can an endless investor bid drive gold materially north of recent highs of around $1365/oz?” said the bank.

“In commodity strategy, we think not – at least not absent another significant risk-off event.”

Aside from investors, demand for gold elsewhere has been less robust while a strong dollar will remain a hurdle for the metal.

A couple of hours into US trading spot gold was US$6 higher at US$1,363. Silver had risen to US$20.39 while platinum eased US$6 to US$1,153.


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