Gold retreated after the Bank of England and the European Central Bank announced their rate decisions, cutting the gains recorded during the session earlier, where the metal was affected by the strengthening dollar against the sterling pound and the euro. Gold fluctuated heavily today as we expected, and is still trading around the opening level at $1640.87 per ounce, after recording the highest at $1654.93 and the lowest at $1634.60 an ounce. The sterling pound dropped today after the Bank of England’s Monetary Policy Committee voted to leave the official Bank Rate paid on commercial bank reserves unchanged at 0.5%, however, the Committee surprised investors with an unexpected move, where the majority of the Committee members voted to expand the quantity of asset purchase program, financed by the issuance of central bank reserves, by £75 billion to a total of £275 billion. The euro also slipped as the European Central Bank Governing Council has voted to leave the benchmark interest rate unchanged at 1.5%, where the Bank negated expectations in the market for rate cuts and applied other unorthodox measures to stimulate the pace of growth and revive recovery after the rising jitters from the debt crisis in Europe hurt the economy. The U.S. dollar index (USDIX) advanced after opening the session at 78.92, and recorded a high of 79.49 and a low of 78.69 and is currently trading around 79.18. Jean-Claude Trichet said in a press conference in Berlin after the rate decision that the current economic conditions remain highly uncertain, while inflation is expected to remain elevated above the Bank’s target of 2.0% over the coming period, while risks to economic growth remain to the "downside". Trichet also unveiled the ECB unorthodox measures, where the bank will offer 40 billion euros of covered bonds starting from November. The Bank will also offer 12 and 13-month loans for banks with full allotment and finally will extend the money operations at least till July 2012. Regarding the current situation in Europe, Trichet demanded all governments to show determination, to take decisive actions and to implement measures to reduce deficits, while nations under bailouts should implement reforms in order to stimulus growth and recovery. Among other precious metals, silver was able to hold onto some of the gains recorded earlier during the session today, where after opening the session at $30.40 an ounce, the metal set the highest at $31.76 and the lowest at $30.21, and is trading now around $30.75 an ounce. |
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