|
|
The WHOLESALE MARKET gold price
slipped 0.6% to $1730 in London on Thursday morning, regaining most of that
dip as the European Central Bank kept its key lending rate on hold and the
Bank of England extended its purchases of UK government bonds to £325
billion ($515bn).
When completed, this new Quantitative Easing will see the Bank hold nearly
one-third of the UK's outstanding national debt.
"The growing consensus among central bankers is that their experiment
with QE is still working," wrote Gavyn Davies,
now of Fulcrum Asset Management and previously a policy advisor to the UK
government, as well as head of global economics at Goldman Sachs until 2001
and chairman of the BBC until 2004, in the Financial
Times on Wednesday.
"It was a shot in the dark, and a rather desperate one at that. But up
to now it has had the desired effect, which is certainly a far better outcome
than the alternative."
"The Bank of England's latest round of quantitative easing is likely to
increase the risk of higher inflation," said World Gold Council director
Marcus Grubb to Reuters, "and prompt investors to seek assets, such as
gold, which can act as a hedge against rising prices."
The gold price for UK investors today slipped 0.5% to £1093 per ounce
as the Pound rallied.
Since the Bank of England began quantitative easing 3 years ago, gold has
risen 70% for Sterling investors.
"Continued optimism over Greece is supportive of gold," said one
London dealer this morning, noting the recent link in daily moves between the
gold price and the European single currency vs. the Dollar.
"There is agreement on all the issues bar one," said Greek finance
minister Evangelos Venizelos to reporters in Athens
today, claiming that only state pensions remain under discussion in budget
cuts demanded by Greece's EU partners and the International Monetary Fund in
return for their €130 billion ($172bn) bail-out.
Greek unemployment has risen to 20.9%, the Statistical Authority said today.
A large chunk of Greece's outstanding debt is due for repayment on March
20th.
Holding UK rates today at a record low of 0.5% for the 36th month in
succession, the Bank of England announced a shift in its purchases of
government debt, targeting more 3-15 year maturities than long-dated gilts.
Twenty and 30-year gilt prices fell on the news, nudging interest rates
higher, but shorter-term UK debt rose sharply, knocking the annual yield
offered to buyers of 5-year gilts back down towards last month's record lows
beneath 1.0%.
UK inflation over the last 5 years has averaged 3.2% per annum. The Bank's
official target is 2.0% per year.
Back in the gold bullion market, "Everyone is in wait-and-see
mode," Reuters quotes Ronald Leung at Lee Cheong Gold Dealers in Hong
Kong.
"We don't see much scrap [supply] and buying has cooled after prices
rebounded. [But] Greece seems to be closer to a concrete deal, which weighs
on the Dollar and helps [the gold price]."
Keeping its key lending rate at 1.0% again on Thursday, the ECB will this
month repeat its unlimited offer of 3-year loans to Eurozone banks, an offer
which drew demand of nearly half-a-trillion Euros in December.
Many analysts expect demand to top €1 trillion on Feb. 29th.
"[Such
action] will lead to a lot of interest into gold," reckons UBS Wealth
Management's head of commodity research, Dominic Schnider.
"Real
assets remain something people like to have in their portfolios. $2000 an
ounce should be easily achieved. We actually expect prices to go above."
.
|
|
