Gold is starting a new week holding around $1,760 an ounce as the markets assess the true state of the economy as well as the likely future action of central banks across the world.
Later this week brings the latest interest rate decision by the Bank of England and while this is likely to have less material impact on the gold price than that of the Federal Reserve, it will still be an important indicator of how aggressive central banks feel they need to be to bring inflation back to its 2% target.
Recent comments from Fed officials hint at the market’s initial reaction to the Fed’s rate hike last week that focused on rhetoric that supposedly pointed to a less aggressive strategy by the US central bank going forward, may be misguided. A large portion of markets’ recent bounce, which gold has also been a beneficiary of, has been predicated on future Fed rate hikes being smaller with fewer of them required. If this proves a false dawn then a fresh slide of both equities, particularly growth stocks, and gold can be expected.
For now at least, gold is holding on to the recovery it made at the end of last week awaiting the next set of data, such as this week’s US jobs figures, to provide insight on the health of the US and indeed global economy.
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