(Kitco News) (Kitco News) - Gold is holding on to modest gains against the British pound even as the Bank of England continues to hold rates steady in restrictive territory.
As expected, the BoE left its Bank Rate unchanged at 5.25% Thursday; the vote on the decision also fell in line with expectations. Two members preferred to reduce interest rates by 25 basis points to 5%, with seven voting to hold firm.
The BoE's latest monetary policy decision is not having much of an impact on gold, which last traded at £1,841.73 an ounce, up 0.49%.
Some analysts were holding out some hope that weaker inflation pressures would encourage the BOE to cut at today's meeting. The central bank acknowledged that inflation last month fell to its 2% target but maintained a cautious stance.
"Indicators of short-term inflation expectations have also continued to moderate, particularly for households. CPI inflation is expected to rise slightly in the second half of this year, as declines in energy prices last year fall out of the annual comparison," the central bank said in its monetary policy statement.
Despite the bank's stance, some monetary policy committee members acknowledged that Thursday's decision was "finely balanced."
While the BoE continues to hold the line on interest rates, analysts expect it's only a matter of time before it starts to ease, in line with other major central banks.
"The next move in Bank Rate remains likely to be a cut, probably at the next meeting in August, as the MPC continue to 'keep under review' how long to maintain the current level of restriction. Such a cut, however, hinges on the disinflation process continuing, and the June CPI figures not bringing any nasty surprises. That said, such a cut is unlikely to be a unanimous decision, with the MPC's hawks likely still concerned about intense earnings pressures, and sticky services prices. These concerns should, more broadly, see the pace of policy normalisation after the first cut remain relatively gradual, with just one further 25bp cut, probably in November, the base case for the remainder of 2024," said Michael Brown, Senior Research Analyst at Pepperstone.
