The pound gained ground against both the dollar and the euro following the Bank of England’s decision to keep interest rates and asset purchases unchanged. Until today sterling had been on a losing streak this week in the face of multiple headwinds, including bleak economic prospects and growing unease regarding the way the coronavirus crisis has been handled by the government.
It therefore wasn’t a foregone conclusion that the central bank would be keeping its policies on hold but the fact it did saw investors, who were braced for a more dovish stance, react with relief and back the pound.
The gold price is slightly suffering against the renewed strength of the greenback. The spot price dropped below $1,700 once again, but the decline has been modest so far and it’s not changing the main trend, which remains supportive for bullion. It will be crucial for the spot price to hold above $1,670, as this level has proven a strong support in recent weeks with the price rebounding when it has neared it.
From a fundamental point of view, there are some concerns about physical demand, particularly jewellery, which plummeted in Q1 2020 due to coronavirus, with investors assessing if this decline will be completely covered by the rise in investment demand.