Gold News

Fed interest rate cut would be 'very price supportive' for gold

An analyst at one of the largest financial institutions in Germany has claimed today (November 27th) that gold investment may be boosted by an interest rate cut in the US.

Bloomberg reports that recent figures have shown that consumer spending has plunged to its lowest levels in seven years in the US as the credit crunch continues to hit personal finances.

With the threat of a deep and lengthy recession looming, speculation is rife that the Fed may look to cut the base rate to 0.75 per cent when it meets on December 16th - a move which could theoretically push gold prices higher.

As Bayram Dincer, commodity analyst at Dresdner Bank - which is the subject of a takeover by Commerzbank, the country's second-largest bank - told the news provider: "Everybody's waiting for the Fed to announce further rate cuts, which will be very price supportive for gold."

Some commentators have made gloomy predictions about gold's prospects of late, with the inflationary period seemingly over and the dollar rising gradually over the past four months.

However, Angus McPhail, a global oil and natural resources analyst at Alliance Trust, the tenth-biggest company in Scotland, has echoed the views expressed by Mr. Dincer.

"Inflation, falling interest rates and weakening currencies (notably the US dollar) are all positive for gold prices," he said.

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