(Kitco News) - The gold market continues to experience increased selling pressure in the broader currency space as central banks appear to be pausing their easing cycles. The Bank of Canada (BoC) is the latest central bank to leave interest rates unchanged.
As expected, Canada’s central bank maintained its overnight rate at 2.75%. The Bank Rate was held at 3%, and the deposit rate remains unchanged at 2.70%.
Although the Canadian economy has held up relatively well during the first three months of the year, the BoC noted that it expects global trade uncertainty to weigh on economic activity.
“In Canada, U.S. tariffs are disrupting trade, but overall the economy is showing some resilience so far. After robust growth in the first quarter of 2025, driven by a pull-forward in exports to get ahead of tariffs, GDP likely contracted by about 1.5% in the second quarter. This contraction is mostly due to a sharp reversal in exports following the pull-forward, as well as lower U.S. demand for Canadian goods due to tariffs,” the central bank stated in its monetary policy report.
While the BoC has paused its monetary policy adjustments, economists do not believe the easing cycle has come to an end. The central bank emphasized that future decisions will depend on how inflation pressures evolve in the second half of the year.
“We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures from higher costs related to tariffs and the reconfiguration of trade. If a weakening economy exerts further downward pressure on inflation and the upward price pressures from trade disruptions remain contained, there may be a need for a reduction in the policy interest rate,” the BoC said.
The gold market showed little reaction to the Bank of Canada’s latest policy announcement. In Canadian dollar terms, spot gold last traded at $4,557.19 an ounce, down roughly 0.5% on the day. Gold fell to session lows against the Canadian dollar following the BoC’s decision.
Gold’s weakness against the loonie is consistent with broader currency movements. Against the U.S. dollar, spot gold last traded at $3,398.10 an ounce, down nearly 1% on the day.
