Gold Set to Rise on Momentum Built Post PBoC Rate Cut

Gold prices are set to rise next week with the metal expected to extend 21 November's positive action, which followed the Chinese central bank's surprise policy move and came against the backdrop of a stronger US dollar.

Traders will be tracking GDP data coming in from the eurozone and from leading gold consumer India next week, alongside the 30 November Swiss gold referendum.

The referendum will decide whether the country's central bank should hold 20% of its reserves in gold bullions, as opposed to 7.8% at present.

As many as 14 of 23 analysts polled in a Kitco Gold Survey said they expected gold prices to trade higher next week, while six predicted that prices will drop and three forecast prices to trade sideways.

Those who see higher prices pointed to gold's upbeat action on Friday, in the face of a stronger greenback, and the rising open interest in the futures market.

Richard Baker, editor, Eureka Miner Report, told Kitco: "...On the news that China will cut interest rates and inject liquidity into their banking system and ECB's (European Central Bank) Mario Draghi is ready to apply 'all means necessary' to meet inflation targets, all boats rise. The S&P 500 scores yet another record intraday high [on 21 November], the US dollar is up, gold is up and the base metal complex is reacting constructively.

"Most importantly the yellow metal is positioned very strongly relative to silver and industrial commodities copper and oil."

Adam Button, editor, analyst at Forexlive.com, said: "I expect some apprehension from sellers and excitement from buyers in the lead-up to the Swiss referendum. No one will want to be short heading into the vote, even if the polls show a clear lead for the 'no' side."

Danske Bank said in a note: "[On 21 November] the People's Bank of China in a surprise move decided to cut its key policy rate - the 1-year lending rate - by 25bp to 5.6%. This is clearly positive for risky assets and for Emerging Markets and commodity currencies in general.

"The cut in our view signals a more dovish PBoC with more willingness to support Chinese growth. This should be positive for global commodity prices and hence should help commodity and Emerging Market currency."

Gold Ends Higher

US gold futures for delivery in December rose on 21 November and finished at $1,197.70 an ounce, after China's central bank unexpectedly lowered rates.

Prices added 1.02% for the week. The December contract expires on 24 November.

Spot gold traded $6 higher at $1,197 an ounce on 21 November.