Tomorrow Bank of England decides on interest rate. According to RoboForex's Andrey Goilov, situation in the UK is complicated as fighting inflation stays in contrary to avoiding recision, but it's high inflation, that is a crucial factor for the BoE. Our team this week also pay attention to gold prices, which, after going up significantly may be supported further from the technical and fundamental point of view.
Andrey Goilov (RoboForex): The British economy is, indeed, not in the best situation, and this makes it harder for the Bank of England to increase interest rates. Many sources are still pointing on a serious risk of recession in the country, and mass strikes can make it even worse. On the other hand, inflation is still high but it must be mentioned that its growth is slowing down. In November last year, it was 10.7%, and in December it dropped by 0.2%. High inflation is a crucial factor for the Bank of England to make a decision to increase the interest rate even in such complicated economic circumstances. The British pound, however, demonstrated a good correction against the US dollar, and since September last year it has managed to rise to 1.24. The second attempt of bouncing off this level can provoke a serious decrease because a Double Top reversal pattern may still form.
Gold price has neared the upper border of the descending channel that started long ago in 2020. Hence, technically speaking there are risks of a downward correction before gold heads for new highs. Buyers need to secure above 2,000: then the upper border of the channel will be broken away, and the three-year long correction will end. This might be the beginning of a new bullish trend in gold. Fundamentally speaking, the price may also go on growing because markets remain concerned about a global recession, and Central Banks will slow down their tightening policies in the nearest future. The Fed has already got prepared for lifting the interest rate by just 25 base points because inflation in the US is slowing down, and in the medium run this can support the precious metal. Moreover, the demand for gold remains high, even exceeding the peak registered in 2011. Central Banks have made a serious impact on the movements of gold quotes by buying the second large volume of the metal in history.
