(Kitco News)- Gold prices are holding on to robust gains against the British pound even as the Bank of England maintains its restrictive monetary in the face of easing inflation pressures.
In a largely anticipated move, the BoE announced it would maintain its Bank Rate at 5.25%.
The central bank’s stance come as it notes that inflation has fallen sharply in recent months, dropping to 3.4% in February compared to 4% in January.
“Headline CPI inflation has continued to fall back relatively sharply in part owing to base effects and external effects from energy and goods prices. The restrictive stance of monetary policy is weighing on activity in the real economy, is leading to a looser labour market and is bearing down on inflationary pressures. Nonetheless, key indicators of inflation persistence remain elevated,” the central bank said in its monetary policy statement.
Despite the relatively hawkish stance, gold is holding solid gains against the pound. Spot gold last traded at GBP1,732.70 an ounce, up 1.35% on the day.
Gold is seeing broad-based strength in the global currency market; however, the precious metal is outperforming the pound compared to the U.S. dollar. Gold last traded at $2,208.26 an ounce, up 1% on the day.
Although the central bank’s monetary policy statement struck a hawkish tone, some analysts have said that there are signs that the committee is preparing to shift its position later in the summer. Analysts note that two central bank committee members who voted for a rate hike at the last meeting, now voted to hold rates unchanged.
“It provides traders with more comfort of a rate cut in August, but that's about it, I'm afraid,” said Justin Low, currency strategist at Forexlive.com.
