Gold shines as yields plunge on BoE intervention

BoE will temporarily carry out purchases of long-dated UK government bonds at an “urgent pace,” and on “whatever scale” necessary to restore orderly market conditions.

Gold 4

The big news today came from the UK, where the Bank of England announced it will intervene in the bond market aimed at attempting to soothe investor nerves after they were spooked by last week’s mini budget. The bank was worried about a “material risk to UK financial stability,” and so it has stepped in to temporarily carry out purchases of long-dated UK government bonds from today at an “urgent pace,” and on “whatever scale” necessary to restore orderly market conditions.

The news sent shockwaves across risk assets as investors attempted to front-run the BoE and potentially other central banks buy buying downbeat bonds. As a result, bond yields sunk, and this triggered a short-covering rally in gold and stock markets.

The intervention by the BoE has given rise to speculation that other central banks might follow suit in a similar way. It remains to be seen whether this will be the case. But traders are buying bonds today and will be asking questions later.

With yields sinking, gold has finally managed to find some buying interest, with the metal able to climb back to the base of the recent breakdown around $1655. Whether or not it can kick on from here remains to be seen. But bullish speculators will not be too excited about a gold recovery until it has formed a higher high and broken out of its bearish channel. It is definitely one to watch though!



Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account