Gold outshone by neighbours as UK joins the negative club

Gold was back in favour again as the UK became the latest country to see interest rates go negative.

picture of car exhaust
Palladium is used to filer exhaust fumes from petrol-driven cars

Gold was back in favour again as the UK became the latest country to see interest rates go negative.

The Bank of England struggled yesterday to find sellers of longer dated gilts though it enjoyed more success at the short dated -end of the market.

Indeed, the bank said it could have bought five times as many shorts as it wanted and such was the demand that rates on loans due to mature in 2019 and 2020 fell to minus 0.17% and 0.015%.

A £60bn bond buyback was part of a package of measures introduced last week by the bank to bolster its economy in the wake of the Brexit vote. The BoE has six months to complete the buyback.

Negative interest rates in a growing number of countries have been one of the reasons gold has rallied so strongly this year, as the metal traditionally has an inverse relationship with bond yields.

A lowering of US interest rate hike expectations helped the metal today, said Commerzbank, though it noted that platinum and palladium performed even better.

“Palladium even climbed for a time by more than 7% or over $50 to attain a 14-month high of a good $740 per troy ounce.”

A couple of hours into US trading, spot gold was US$4 higher at US$1,344, silver was up 1.8% at US20.2.

Platinum, though, jumped by US$24 to US$1,176 and palladium gained US$37 to US$728, a rise of more than 5% that was put down to short-covering by traders.  

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