Japan’s Monetary Reboot Still Good For Gold; Fed Now On DeckBy Kitco News
Wednesday September 21, 2016 08:42
(Kitco News) - A reboot of the Bank of Japan’s monetary policy created some momentum in gold overnight and all eyes are now on the U.S. central bank to determine if the rally will continue, according to some analysts.
During the Asian trading session, the Bank of Japan, while not introducing any new stimulus measures and maintaining its negative 0.1% interest rate, announced a refocusing of the policies, saying that it would concentrate on “yield curve control,” with a focus on government 10-year bonds.
The central bank also abandoned its target for expanding its monetary base, saying it will “continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds the price stability target of 2 percent and stays above the target in a stable manner.”
According to commodity analyst at Commerzbank, the news was slightly disappointing as the new strategy “relies on old instruments, regardless of how they function.” However they added that the news is good for gold, as a store of wealth, as the bank continues to pursue “extremely expansionary” monetary policy.
Ole Hansen, head of commodity strategy at Saxo Bank, said that following the BOJ monetary policy meeting, gold has enough momentum to hold at near-term resistance at $1,330 an ounce but not enough to break above.
“A zone of resistance between $1,325 and $1,330/oz is likely to prevent gold from making further advances ahead of the FOMC meeting later today,” he said in a note Wednesday. “A dovish Federal Open Market Committee announcement later today may be what investors need to bring an increasingly stale market back to life.”
Although gold is seeing a boost in the overall market, in global currency markets, it is seeing its worst performance against the Japanese yen. According to Kitco.com gold currency charts, spot gold is flat on the day against the yen, compared to almost 1% gains across the board against all other major currencies.
Ahead of the North American open, December Comex gold futures last traded at $1,333.20 an ounce, more than 1% on the day.