Gold declines after the several credit rating cuts in Europe
Gold returned to decline again despite the expected upside move yesterday, where the metal reversed sharply to the downside yesterday, cutting all the gains recorded earlier after Moody's Investor Services cut the credit rating of six European nations and placed other three rankings under negative outlook, which spread pessimism in the market and supported the U.S. dollar to gain momentum, and in result forced downside pressures on the metals to trade lower.
Gold shed 0.23% of $4.00 per ounce after the opening of $1722.28 per ounce to currently trade around $1718.28 per ounce. The metal set so far the highest at $1722.70 and the lowest at $1714.78 per ounce.
Moody's rating agency downgraded yesterday the credit ranking of Italy, Portugal, Slovakia, Slovenia and Malta by one notch, while it cut the Spanish credit rating by two notches. However, France, the United Kingdom and Austria were placed under negative outlook for a possible downgrade in the future due to a number of specific credit pressures that would exacerbate the susceptibility of these sovereigns' balance sheets.
The United Kingdom responded immediately to the announcement, where George Osborne, the British Finance Minister said that the nation will still slash its large budget defect.
On the other hand, Moody's confirmed the triple-A ratings of Germany, Denmark, Finland, Luxembourg and The Netherlands in addition to affirming the triple-A credit rating of the European Financial Stability Facility.
Moreover, the Bank of Japan kept rates unchanged today at the virtually zero range of 0.0%-0.1%, where the bank attempts to encourage growth and support the pace of recovery especially after the nation's exports dropped sharply in the fourth quarter and during the entire year after the disaster which hit the nation in March.
The Japanese Yen retreated sharply against the U.S. dollar as the Bank of Japan opted to increase the stimulus provided by an unexpected 10 trillion yen to 65 trillion from 55 trillion, where the bank kept the credit program unchanged at 35 trillion yen; however, the bank increased asset purchases program (APF), where this sudden move weakened the yen and supported the greenback to trade higher.
Today, inflation data from the United Kingdom are also expected to affect the metal's movement, with expectations inflation could have dropped sharply in January to 3.6% from 4.2% in the Kingdom, adding downside pressures on the metal as few investors will hold the metal as a hedge against uncertainty now.
Moreover, our eyes will be also focused on the retail sales index from the world's largest economy, with expectation the retail sales could have improved significantly in January as the U.S. is believed to be on the right track to recover and expand again. The metal could rebound to the upside in case the indexes met or came better than expectations.
Among other precious metals, silver cut 0.40% or $0.14 per ounce after the opening of $33.72 per ounce to hover in the moment around $33.58 per ounce. The metal reached a high of $33.72 and a low of $33.46 an ounce.
Platinum also cut 0.67% or $11.00 per ounce to trade in the momentum around $1640.75 per ounce after starting the session at $1651.75 per ounce. The metal set the highest at $1652.50 and the lowest at $1639.25 per ounce.
Palladium lost 0.14% or $1.0 per ounce to $698.00 per ounce, recording the highest at $700.00 and the lowest $694.45, noting that the metal opened the session at $699.00 per ounce.