The spot gold price fell to $1,772 an ounce Wednesday morning in London, a few hours after hitting its highest level for nearly seven months after the Bank of Japan became the latest central bank to announce further quantitative easing measures.
"It seems that the stars are now aligned for gold to move higher," says Anne-Laure Tremblay, analyst at BNP Paribas.
"The next hurdle to overcome will be the $1,800 an ounce level, which we expect to be breached decisively in the fourth quarter."
The silver price fell to around $34.60 an ounce – having hit $35 a day earlier for the first time since March.
Stocks and commodities were little changed on the day by lunchtime, while US Treasuries gained.
Japan's central bank announced Wednesday that it is increasing the size of its asset purchase program from ¥70 trillion to ¥80 trillion, pushing the deadline for the end of the program to the end of next year.
The Bank of Japan has also abolished the minimum bid yield of 0.1% on JGB and corporate bond issues.
"Japan's domestic demand is still firm," BoJ governor Masaaki Shirakawa told a news conference today.
"However, exports and output look weak, and a decline in oil prices is weighing on Japan's consumer prices...we judged that further monetary easing was necessary now to ensure that Japan's economy does not slip from a path towards sustained growth with price stability."
"Further easing is still possible this year because the BoJ is emphasizing uncertainties in its outlook," says Masamichi Adachi, Tokyo-based senior economist at JPMorgan Securities.
The BoJ's move follows last week's announcement by the US Federal Reserve that it will buy $40 billion of mortgage backed securities each month until the US labor market improves "substantially", as well as the European Central Bank's unlimited sovereign bond buying program unveiled earlier this month.
"The main message from today's decision is that the BoJ is following the global trend set by the Fed and the ECB," says Junko Nishioka, chief Japan economist at RBS in Tokyo.
"Whether central banks intend it or not, there is a competition for loosening monetary policy around the world," agrees Izuru Kato, chief market economist at Tokyo-based financial consultancy Totan.
"[Shirakawa won't want to seem] reluctant to compete in the race."
Shirakawa however denied the BoJ's move is a direct response to other central banks' policies.
"I do not think any central bank would act simply because another central bank acted," he said.
"If it is a question of comparing the BoJ to the Federal Reserve or the European Central Bank, I think the issue is not of methods but of the impact of those methods.... I think monetary conditions are easiest in Japan. I do not think that you could argue that the BoJ is less bold that the Fed or the ECB."
Shirakawa also denied the move is a response to anti-Japanese protests in China, which have seen some Japanese firms repatriate their staff.
The yen fell around 0.7% against the dollar immediately following the BoJ's announcement, although by lunchtime in London it had regained around half its losses.
The gold price in yen meantime rose to within 5% of last year's all-time record, while the gold in Dollars set a new six-month high at just below $1,780 per ounce.
"Gold is given a boost on the back of anything that is a form of quantitative easing," says Bernard Sin, head of currency and metal trading at refiner MKS in Geneva.
"At some point there'll be some profit taking but we'll continue to trend higher."
Here in the UK, the Bank of England's Monetary Policy Committee voted unanimously to leave its main interest rate at 0.5% and maintain the size of quantitative easing at £375 billion when it met earlier this month, minutes from the meeting published Wednesday show.
"For most members this decision was relatively straightforward," according to the minutes, "although some of these members felt that additional stimulus was more likely than not to be needed in due course, while others saw the risks to inflation in the medium term as being more balanced around the [2%] target."
UK inflation as measured by the consumer price index was 2.5% in August – the 33rd consecutive month it has been above the Bank's target.
Over in Europe, Bundesbank chief Jens Weidmann yesterday warned of the "potentially dangerous correlation of paper money creation, state financing and inflation", adding that Goethe's play 'Faust' highlights "the core problem of today's paper money-based monetary policy", the Financial Times reports.
"The state in 'Faust Part Two' is able at first to rid itself of its debts while consumer demand grows strongly and fuels a strong recovery," Weidmann told an audience in Frankfurt.
"But this later develops into inflation and the monetary system is destroyed by rapid currency depreciation."
Elsewhere in Europe, €326 billion was withdrawn from banks in Greece, Ireland, Portugal and Spain in the 12 months to the end of July, according to data published by Bloomberg Wednesday.
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