Gold to gain more today, ahead of the BoE and ECB rate decisions

With the start of the session today, gold is trading within narrow levels ahead of the Bank of England and the European Central Bank rate decisions; however, we expect gold to gain more today before the rate decision, where investors will hold more gold as a hedge against uncertainty in order to protect their wealth, especially when the awaited European summit should start this evening.

Gold opened the session in Asia today at $1741.60 per ounce, and recorded the highest at $1742.80 and the lowest at $1734.57, and is trading in the moment around $1737.17 per ounce.

Optimism could be seen in the market today after the rate decisions, where the Bank of England is expected to keep rates and asset purchases program unchanged at 0.5% and 275 billion pounds respectively, where the Bank aims to spur growth and revive the recovery especially after the escalating debt crisis hurt the U.K economy sharply, which led policy makers to act individually to solve the nations challenges, where unemployment climbed to 8.3% in November, the highest in three years, while inflation lingered around 5%.

The Bank may not provide any other tools today, especially when it introduced this week a new contingency liquidity facility, the Extended Collateral Term Repo (ECTR) Facility, which is designed to mitigate risks to financial stability arising from a market-wide shortage of short-term sterling pound liquidity.

The sentiment may improve slightly today, while the focus will be on the European Central Bank, where the Governing Council is projected to cut key rates by 25 bp to 1.00% from 1.25% in order to spur growth that faltered due to the escalating debt crisis and the worsening economic conditions in the euro-area region.

The ECB is also expected to add further stimuli in terms of loans for banks, where in addition to the continued short-term money operations; the Bank is also expected to provide loans for banks with full allotment and longer maturities is order to support banks to access cheap funds, which in result could prevent interbank lending freeze from threatening the European financial sector.

In general, gold is expected to extend the gains today after the Bank of England and the European Central Bank rate decisions; however, volatility and fluctuations are also possible, where cautious trading is expected to remain evident ahead of the European summit, which starts this evening and ends tomorrow, as all markets are looking forward to European leaders with hopes this time they will not disappoint investors as usual and will provide strong and comprehensive plans to overcome the debt crisis once and for all.

Among other precious metals, silver opened the session at $32.46 per ounce, and fluctuated within narrow levels, setting a high of $32.62 and a low of $32.34, and is trading now around $32.47 per ounce.

Platinum after the opening of $1527.50 per ounce lost as much as $8.75 or 0.57%, to currently trade around $1517.75, after setting the highest at $1527.50 and the lowest at $1517.00 per ounce.

Palladium however gained 0.07% or $0.50 after opening the session at $679.00, to currently trade around $679.50 per ounce, after reaching a high of $680.50 and a low of $672.75 per ounce.