Gold hits record high after ECB rate hike
London, April 7, 2011
Gold hit a fresh record high near $1,465 an ounce on Thursday after European Central Bank president Jean-Claude Trichet indicated the rate hike announced by the bank earlier may not be the first in a series.
Spot gold hit a record $1,464.80 an ounce and was bid at $1,460.50 at 1420 GMT, against $1,457 late in New York on Wednesday. US gold futures for June delivery were up $3.80 an ounce to $1,462.30, having peaked at $1,467.
The ECB lifted interest rates by 25 basis points on Thursday as expected, but Trichet said in a press conference after the move that the bank had not taken the decision as the first in a string of such moves.
"The market had factored in that Trichet would be a bit more hawkish in his comments," said Peter Fertig, a consultant at Quantitative Commodity Research. "If you look at government bond markets, they all recovered during his press conference."
"Of course they will be vigilant in monitoring inflation developments very closely. But it is more inflation expectations that made the ECB concerned, and less the actual increase (in inflation)."
Gold tends to suffer in a rising interest rate environment, as this raises the opportunity cost of holding non-interest bearing bullion. Expectations for a rise in euro zone rates kept a lid on gold's rally to record highs earlier this year.
That came largely on the back of unrest simmering across the Middle East and North Africa, which has lifted risk aversion, and boosted oil prices to multi-year highs.
A Nato air strike killed at least five rebels near the Libyan port of Brega, medics said, and insurgents reported Muammar Gaddafi's forces killed five more in a bombardment of besieged Misrata.