-- Posted Thursday, 6 November 2008 | Digg This Article
| Source: GoldSeek.com
The Morning Gold Report by Peter A. Grant
Nov 06 a.m. (USAGOLD) -- Gold rebounded intraday after the BoE, ECB and SNB all cut interest rates. However, prices subsequently moderated and the yellow metal remains confined to the recent range.
Rate cuts were widely expected, but the size of England's cut took the market by surprise. The ECB and SNB each cut rates by 50bp, in line with expectations. However, the Bank of England slashed rates by a much larger than expected 150bp, citing the need for drastic measures to prevent the country from sliding into a deep recession.
The BoE's base rate is now just 3.0%, the lowest level in more than half a century. The economy is slowing significantly and price pressures are expected to moderate in 2009. At the same time, credit conditions have continued to tighten further increasing risks for a severe protracted recession.
Today's move, along with expectations of further easing ahead of year-end, is indicative of just how dire things have become in the UK. Analysts suggest that the base rate could drop another 50bp in Dec and perhaps an additional 100bp in 2009.
The US stock market is expected to open lower today after dropping sharply on Wednesday. The DJIA recorded its largest post-election day point drop ever. Yesterday's ADP employment report showed that nonfarm private employment fell by 157,000 jobs in Oct. This sets the stage for a rather dismal nonfarm payrolls number on Friday.
Look for gold to remain underpinned on continued safe-haven interest. A short-term retest of last week's high at 776.80 is likely with potential for a move back above $800.00.
Gold Market Movers:
UK interest rates cut to 3%
ECB cuts interest rates to 3.25%
Stocks fall as investors ponder Obama presidency
Record gold coins delivery by MCX
