By Barani Krishnan
Investing.com - The Fed and the ECB have, unwittingly, made the day for gold bulls.
Wednesday’s announcement of stimulus tapers and expected rate hikes by the Federal Reserve sent Treasury yields tumbling on Thursday as investors shed fears of excessive hawkish action by the central bank.
That allowed bullion prices to soar to within a touch of the key $1,800-an-ounce level as the focus returned to inflation hedging.
Adding to the boost for gold was a surprise rate hike delivered on Thursday by the Bank of England, which became the world's first major central bank to do so in the aftermath of the coronavirus pandemic that hammered the global economy nearly two years ago.
Both the Fed and the BOE warned that inflation unleashed by the pandemic was one they hadn’t expected, with the U.K. bank cautioning that it expected it to be as high as 6% in April - three times above target — while price pressures in the United States stay at four-decade highs.
Another U.S. indicator for inflation was data on new residential construction released on Thursday that showed housing starts up almost 12% in November — the most in eight months — despite record high home prices.
Gold was also helped by investors’ move on Thursday into safe-havens as mega-cap tech stocks on Wall Street’s Nasdaq index took a drubbing.
“The number of short-term risks remain elevated and that could ultimately lead to further inflows to gold now that much of Fed tapering and the (expected) initial rate hikes have been fully priced in,” said Ed Moya, analyst at online trading platform OANDA.
“Risk aversion is hitting the Nasdaq and that has some traders going into cyclicals, while others are buying safe-havens such as gold,” said Moya, noting that gold still faced massive resistance at $1,800 and at its 200-day Simple Moving Average on charts.
U.S. gold futures’ most active contract, February, settled Thursday’s trade up $33.70, or 1.9%, at $1,798.20 an ounce on New York‘s Comex. That was the biggest one-day percentage gain for a spot gold contract on Comex since October 15.
The session peak for February gold was $1,799.95 — the closest it has to come to capturing the $1,800 level since Dec. 1.