Gold futures headed lower after the Bank of England decided to hold interest rates. REUTERS/Lisi Niesner

Precious metals were dragged lower by gold following a surprise decision by Bank of England to hold interest rates at 0.5% at the conclusion of its monetary policy meeting on Thursday (14 July).

Comex gold futures came the worst off, shedding 1.33% or $17.90 to $1,325.70 at 1:02pm BST. Concurrently, silver futures registered a 1.00% or ¢21 decline to $20.21 an ounce, while spot platinum fell 0.99% or $10.90 to $1,086.19 an ounce, as UK monetary policymakers voted 8-1 in favour of holding fire on the interest rate front.

The equity market advance was already weighing on gold prices, stunting safe-haven investor appetite for the yellow metal.

Darren Ruane, head of fixed interest at Investec Wealth & Investment, said: "The Bank of England surprised investors by not reducing the UK's base interest rate to 0.25% from 0.5% or even adding to its quantitative easing policy which is at £375bn.

"Market implied interest rates were pricing in close to a 100% probability of a rate reduction while around half of economists expected a change. In some ways, the decision should not be a big surprise to the markets because monetary policy committees prefer to make a change in months where there is a full review of growth and inflation figures, and this does not occur until the August meeting."

Only one MPC member – Gertjan Vileghe – dissented from the no change consensus and voted for a 0.25% rate cut. It is likely that markets will comprehensively price in the likelihood of a rate reduction in August.

Howard Archer, chief UK economist at IHS Global Insight, also admitted his surprise at the BoE's inaction. "We had expected some stimulus to be delivered at the July meeting even if some moves were likely to be delayed until August when the Bank of England will have new growth and inflation forecasts available.

"Given the sharp drop in consumer confidence and evidence of weakened business sentiment, we believed there was a compelling case to cut interest rates from 0.50% to 0.25% now. Nevertheless, stimulus remains on the cards."

Crude Oil Futures
Crude oil futures rose but oversupply concerns continue to hound the market Reuters

Meanwhile, oil futures recovered ground following overnight declines as traders continue to fret over global demand. At 1:15pm BST the Brent front month futures contract was 2.05% or ¢95 higher at $47.21 per barrel, while the West Texas Intermediate up 1.83% or ¢82 at $45.57 per barrel.

Oversupply concerns continue to mount with oil producers proving to be more resilient than the market expected in an era of low oil prices. Touching on Canada's oil production, a report by GlobalData noted the production of the country's oil sands is set to continue its path of growth, with plans for six new oil sands projects and the expansion of another 11.

The research and analysis firm said the growth will be supported by the size of the resource, the well-established and developed industry in Alberta, and the relatively secure demand for heavy crude oil in the refining market of the US.

Adrian Lara, senior upstream analyst at GlobalData, said: "There is a real opportunity for increasing oil sands refining market share in the US and Gulf of Mexico, as the decline in the production of traditional suppliers of heavy crude such as Mexico and Venezuela leaves complex refineries needing to draw the supply from other reliable sources such as Alberta."