Gold in sterling was 2.2% higher yesterday and was marginally higher in dollar terms after the Bank of England cut interest rates to all time, 322 year record low at 0.25% and surprised markets by renewing and aggressively expanding quantitative easing or QE.
Sterling fell sharply on markets and gold rose from £1,014/oz to over £1,036/oz where it remains this morning. Ultra loose monetary policies are now even looser after the BOE cut interest rates for the first time in more than seven years and launched a bigger-than-expected package of monetary measures.
Gold in GBP (10 Years)
The Bank cut official interest rates to a new record low of 0.25% from 0.5% and signalled they would be reduced further in the coming months. The deepening of ultra loose monetary policies is bullish for gold, especially in sterling terms.
Sterling gold is 38.4% higher in 2016 year to date. This means that gold is now just 14% below the all time record nominal high of £1,179/oz reached on the 5th of September 2011. Gold remains one of the best performing assets in all currencies over a 10, 15 and 20 year period.
Governor Carney also aggressively renewed and expanded its QE and launched a new £100bn funding scheme for banks. The BoE also launched a new £70 billion a month bond-buying programme which was quickly termed a ‘sledgehammer stimulus’ by analysts. This will include £10 billion of sterling denominated investment grade corporate bonds, from companies the BOE judges make a “material contribution” to the UK economy. Read more….