Gold Surges as Central Banks Don't Raise Rates

Market Trends - 16/06/2016

Gold prices extended their gains for the seventh consecutive day, trading near May 2016 highs of $1300 an ounce after the US Federal Reserve and the Bank of Japan opted to leave monetary policy unchanged.

On Wednesday, the Fed kept the interest rate steady at 0.50% as expected and signaled that it had planned to hike rates twice in 2016. The bank said however that slower economic growth would mean the monetary policy would remain accommodative. The US dollar fell on the Fed's statement, giving gold prices a push alongside investors that are buying the safe haven asset amid mounting uncertainty on the UK’s referendum outcome next week.

On Thursday morning, the Bank of Japan left monetary policy unchanged as well, despite anemic growth and weak inflation. With upper house elections due in early July, the BoJ's policy inaction was widely expected. With these major central banks standing by, gold investors are now likely to focus attention to next Thursday's UK referendum vote. The uncertainty into the event could see gold prices well bid to the upside. Latest polls show the ‘Leave’ camp gaining 52%, against 48% in favor of ‘Remain[ing]’ in the Union.


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