The Gold Price could be given a boost as a result of a policy-divide at the Federal Reserve, says an analyst at Swiss investment bank UBS.
Members of the Federal Open Market Committee (FOMC) appear to disagree on whether or not they should raise interest rates to ward off inflation. William Dudley, president of the New York Fed, said last week that the Fed was “still very far away” from achieving its employment and price stability targets.
His comments contrast with those of more hawkish colleagues, leading one analyst to suggest the indecision could be positive for the Gold Price.
“Dudley's comments Friday underlined the lack of consensus on the FOMC,” said Edel Tully, precious metals strategist at UBS. “This policy divide is gold-positive.”
In Europe meanwhile there are fears that an expected rate hike by the European Central Bank on Thursday, intended to control Eurozone inflation, could trigger a sovereign debt crisis.
"As the ECB continues to tighten, it increases the risk that the sovereign-debt crisis comes back," said Gavyn Davies, chairman of London-based hedge fund Fulcrum Asset Management LLP, which has $1.5 billion under management.
Nouriel Roubini, professor of economics at New York University’s Stern School of Business, is also wary that a rate rise could hurt the Eurozone’s weaker members.
“[You] have five countries in the periphery where there’s almost no growth...I fear that an early hike is going to increase the growth fragility,” he said.
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