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Commerzbank: More rate cuts could boost appeal of investing in gold

Commerzbank has claimed today (December 4th) that a prolonged spate of interest rate cuts in major economies could provide a major boost for anyone with a gold investment, Reuters reports.

The European Central Bank has cut its benchmark rate by 0.75 percent to 2.5 percent, while the Bank of England lowered the base rate by a full percentage point to two percent.

Now Germany's second-largest bank has explained that while the recent dip in inflation has affected gold, it will be buoyed by further rate cuts if they serve to increase liquidity.

Quoted by the news provider, it said in a note: "The recent sharp dip in inflation pushed up real interest rates, exerting pressure on gold.

"Generous rate cuts are therefore good for gold as they again reduce the opportunity costs involved in holding it."

Those sentiments were echoed recently by Matt Zeman, the head trader at Chicago-based firm LaSalle Futures, who explained that people will increasingly buy gold if rates continue to plummet.

"Gold may eventually rebound as global interest-rate cuts devalue currencies and stoke inflation," he said.

"If everybody continues to drop rates and rates stay very low, inflation may come back with a vengeance. In that environment, gold would do very well."

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