(Kitco News) – Persistent inflation pressures continue to take their toll on the gold market as central banks are forced to adopt hawkish monetary policies, with the Bank of England being the latest example.
On Thursday, in a widely anticipated move, the Bank of England raised its Bank Rate by 0.25 percentage points to 4%. The central bank also projects inflation will move higher next year.
“The conflict in the Middle East is now in its ninth month. Global energy prices have continued to rise from an already elevated level. UK CPI inflation increased to 3.5% in September. It is now expected to rise to around 5% by the middle of next year. It is then projected to fall as the impact of rising energy prices on 12-month inflation rates fades, and still restrictive monetary policy bears down on inflation,” the central bank said.
Although the central bank expects inflation pressures to increase, the committee provided limited forward guidance.
“Monetary policy is not on a pre-set path. The Committee will continue to assess the evidence at each meeting, in particular how likely high energy prices are to feed through to other prices and the economy more broadly, by monitoring the evolution of underlying pay, pricing behaviour, and slack. The Committee will adjust Bank Rate as necessary to ensure CPI inflation returns to the 2% target in the medium term,” the central bank said.
Gold prices have seen some modest selling pressure in the initial reaction to the BoE’s monetary policy decision. However, the precious metal continues to hold gains above critical support levels.
Spot gold last traded at £3,065.90 an ounce, up 1.70% on the day. Gold’s price action against the pound is in line with the broader market. Spot gold last traded at $4,128.54 an ounce, up 1.74% on the day.
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