Gold Prices Firm Ahead of BoE’s Biggest Rate Hike In 27 Years – What’s Next?
Bank of England Meeting on Thursday
Looking ahead to this week, trader’s attention has now shifted to the Bank of England’s monetary policy meeting, scheduled for Thursday.
As one of the closely watched “Big 4 Central Banks”, this event is anticipated to be a major market mover and shaker – especially as the BoE is expected to follow in the Federal Reserve’s footsteps by unleashing its first “super-sized” interest-rate hike since 1995.
Expectations are running high, that the Bank of England will push through its biggest rate hike in 27 years by raising its key interest rate by 50 basis points to 1.75% – as it desperately grapples to fight record-high inflation that skyrocketed to a fresh 40-year high of 9.4% in June.
That’s way above the U.K government’s inflation target of 2%, and there are fears inflation could exceed 12% by October as Food, Fuel, Housing, Clothing and Energy prices continue to surge at record pace, deepening the country’s historic cost-of-living crisis.
The UK central bank also is concerned about falling behind peers, especially the U.S Federal Reserve, which has raised interest rates by a total of 200 basis points in the last 60 days – with Fed Chairman Jerome Powell signalled that yet another “super-sized” hike could be on the cards for September.
Other Central Banks and Impact on Global Economy
Europe’s central bank, in contrast, has been one of the slowest to react, waiting until last month to hike rates but with a bigger-than-expected half-point increase.
There’s no denying that a string of big rate rises by the Federal Reserve has now put pressure on central banks around the world to follow suit to counter soaring inflation and the strong dollar.
As traders very well know – every major central bank rate hike enviably pushes the global economy one step closer to a recession. Those odds, once again hardened last month with Economists warning that “central bank monetary policy makers pose the greatest risk of a recession starting this year”. While a growing number of Economists argue that the recession has already arrived.
Precious Metals Reaction
If history has taught us anything, then the one thing that we do know for certain is both scenarios, whether that’s persistent Inflation or a recession, ultimately present an extremely lucrative backdrop for precious metal prices.
Right now, this is a traders’ market packed with endless opportunities to capitalize on the short-term macro-driven volatility – And that’s the optimal strategy right now!
Gold Price Forecast Video for August 3, 2022
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