What lower central bank lending rate means for gold

Central banks of the US, Europe and Japan announced on Wednesday that they would act jointly to provide the Euro zone with cheap access to the dollar in order to help the European banks which face a credit crunch. The central banks have reduced their rates by 50 basis points for the dollar swaps.

As far as precious metals are concerned, such an action is quite bullish. By lowering the borrowing rates, the value of dollar will decline against other currencies, raising inflation and as such could push Gold and Silver higher.

Gold has already spiked higher and dollar has fallen sharply.

Peter Schiff, global strategist of Euro Pacific Capital Inc echoed the sentiment. “Well I think the world’s central banks rung a pretty loud bell today to buy precious metals, you had the Federal Reserve along with many central banks around the world reducing their rates by 50 basis points that they charge for dollar swaps”, he said. – CommodityOnline

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Posted by admin on Dec 1 2011. Filed under Gold predictions. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry