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Gold falls as market pauses ahead of Bank of England policy statement

Gold fell on Thursday after rising nearly 1 per cent in the previous session, as the dollar strengthened against the yen and Asian stocks stayed near eight-month highs. Photograph: (Getty)

Bengaluru, Karnataka, India Jul 14, 2016, 07.35 AM (IST)
Gold fell on Thursday after rising nearly 1 per cent in the previous session, as the Dollar strengthened against the Yen and Asian stocks stayed near eight-month highs on expectations of an interest rate cut by the Bank of England (BoE).

Investors bet the BoE will cut interest rates for the first time in more than seven years to ward off recession following Britain's vote to leave the European Union.

The central bank is expected to halve its benchmark interest rate to a record low of 0.25 per cent when it makes a monthly policy statement at 1100 GMT later on Thursday.

Spot gold was down 0.8 per cent at $1,332.33 per ounce by 0639 GMT. It rose about 0.9 per cent on Wednesday, closing at $1,342.45.

"Despite our near-term views that gold may correct further, we believe any losses may be limited and further declines well-bid," HSBC analyst James Steel said in a note.

Low interest rates boost the appeal of non-interest bearing assets such as bullion.

Spot gold is biased to retest a support at $1,328 per ounce, a break below which could cause a loss to the next support at $1,313, according to Reuters technical analyst Wang Tao.

Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong, said gold prices had steadied due to a number of stabilising factors including the appointment of a new prime minister in the UK, and the expected interest rate cuts by the Japanese and England central banks.

"Major central banks including the Bank of England and the European Central Bank are expected to relax their monetary policies, while the US Federal Reserve is reluctant to raise interest rates. People are expecting these central banks to relax their monetary policies in the wake of the financial and political uncertainty," he added.

Philadelphia Fed President Patrick Marker said late on Wednesday that the central bank would likely opt for a "fairly shallow" series of US interest rate hikes, and that he wanted to "let it play out a bit" before backing a policy tightening.

The Dollar was up 1 per cent at 105.57 Yen, its post-Brexit high, as investors remained focused on whether the Bank of Japan will expand its monetary stimulus at its policy meeting later this month.

Among other precious metals, spot palladium slipped 0.1 per cent to $640.50 an ounce, after hitting an eight-month high of $647.20 in the previous session.

Silver edged down 0.3 per cent to $20.28 an ounce, while platinum fell 0.7 per cent to $1,086.85 an ounce.

(Reuters)
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