Gold to surge ahead of the ECB, BoE rate decisions
Gold started the session today biased to the upside, where investors after the decline seen yesterday, returned to demand more of the shiny metal as a hedge against uncertainty ahead of the critical European Central Bank and Bank of England rate decisions, with expectations both banks will leave rates unchanged at 1.0% and 0.5% respectively as policy makers attempt to spur growth further, especially when inflation started to retreat.
Gold fluctuated heavily after the opening of $1733.20 per ounce between the highest level recorded at $1739.57 and the lowest at $1726.18; however, the metal added so far 0.03% or $0.53 per ounce to $1733.73 per ounce.
Gold is expected to gain more momentum during the European session today ahead of the European Central Bank and the Bank of England rate decisions, where investors are still holding more of the metal as a hedge against uncertainty as the Greek financial future is still unknown, where yesterday the leaders of the Greek political parties failed to reach an agreement and now eyes will track the Greek finance minister who will join his peers in Brussels at 17:00 GMT to end the complicated Greek situation.
The European Central bank is expected to leave rates unchanged at 1.0% in order to keep the balance between inflation and growth, where with the start of 2012 some positive signs were seen from the euro-area region, while the ECB president, Mario Draghi, said in January that the European economy started to stabilize and now we can see inflation started to ease and hopefully growth will pick up soon, especially when the bank will provide cheap funds again to the financial sector at the end of this month in order to confirm an adequate level of liquidity in the market, which in result should support growth and recovery to improve.
For the Bank of England, it is expected to leave rates unchanged as well at 0.5%, where the Bank still attempts to revive growth and support the pace of recovery, while markets speculate that the Bank could add further stimuli this month after the first round of assets purchases failed to support growth as expected. The bank is expected to add another 50 billion pound of stimulus after the previous addition of 75 billion, where the monetary easing could reach in total 325 billion pound.
Moreover, eyes will also be focused on Draghi's press conference at 13:30 GMT, where investors will be tracking what the European Central Bank will say regarding the euro-area economy, is there any signs of improvement and finally whether the ECB will provide markets with more easing to support growth prospects or it will standstill again waiting the effect of the previous stimulus to appear.
In general, we expect markets to remain volatile and to fluctuate heavily ahead of the awaited events, as any unexpected move from the ECB or BoE could trigger violent moves to the market.
Among other precious metals, silver declined 0.62% of $0.21 per ounce to currently trading around $33.76 per ounce after starting the session at $33.97 per ounce. The metal set the highest at $34.09 and the lowest at $33.68 per ounce.
Platinum also retreated 0.23%or $3.75 per ounce after the opening of $1663.75 per ounce to currently trade around $1660.00 per ounce. The metal reached a high of $1667.72 and a low of $1654.25 per ounce.
Palladium however gained 0.45% or $3.25 per ounce to $718.00 per ounce, recording the highest at $718.50 and the lowest at $718.00, noting that the metal started the session at $714.25 per ounce.