BoE holds rate cut, precious metals hold breath

The Bank of England did not look to increase stimulus or cut rates at this meeting, which many were anticipating. The reaction was a drop in the UK 10yr price, moving yields higher. Across the world we are seeing yields continue to hit record lows and the BoE’s decision to stand pat was the first of expectations of easing not being satisfied. Should the Fed talk alter today be less dovish and Data points for the US and UK are better than the expectations, you could see interest rates start to move Treasuries and even Gilts back towards safe havens. ​

Source: Bloomberg

This could have a negative implication on Gold and Silver, where the rise in these metals can be correlated with the dampening expectations of inflation and interest rates over the coming years. To an extent the rise in the precious metal prices are justified, growth across the globe is being revised lower and inflation expectations are going with it. Central banks seem to need to start increasing asset purchases in Japan, the Eurozone, and the UK (depending on data according to the minutes).  As discussed in an earlier post, expectations of longer term interest rates and the price of precious metals will have a higher correlation and any mis-match in expectations could take the wind out of the precious metal rally.​