Gold and oil could force surprise ECB rate hike

With political uncertainty in the aftermath of the French and Dutch rejection of the European constitution, and stagnant growth and rising unemployment, most analysts are expecting the ECB to come to the rescue with a rate cut. However, recent weakness in the euro and sharp rises in the euro prices of both oil and gold suggest that the ECB’s next interest rate move could be up, not down. With euro zone inflation currently running at an annualized rate of 2.1%, just above the official 2% allowable ceiling, surging energy prices, higher import prices in general, and increasing cost pressures for local manufactures, will likely push this rate much closer to 3% in the coming months. In the last two weeks, the euro price of oil surged from 38.70 to 45 euros per barrel, a 16.3% rise, surpassing 40 euros per barrel for the first time ever. During that same time period, the euro price of gold rose from 331 to 345 per ounce, a 4.2% gain, closing within five euros of the key 350 level, ...

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