2016-07-29 11:44:04

At today’s meeting the Bank of Japan decided to leave the volume of government bonds purchases at the previous level of 80 trillion yen and rates on deposits of the commercial banks at the level of -0.1%.

7 out of 9 members of the board of the Bank of Japan voted for the purchase of the shares of the funds traded at the stock market (ETF) in the volume of 6 trillion yen per year.

This decision of the Bank of Japan disappointed investors, who hoped for more decisive actions from the Bank, which caused sharp rise in the Yen against the USD. The pair USD/JPY has dropped by over 150 points after the announcement of the Bank’s decision. The Yen sharply went up in the currency market. Within one hour after the announcement of the bank’s decisions volatility in the pair USD/JPY amounted to 290 points.

Fluctuation in the pair USD/JPY caused volatility in other pairs with the USD and the Yen. Spot - price of gold soared up to 1343.00 USD per troy ounce.

Volatility in the pair XAU/USD exceeded $15. Despite the brief rise in the price of gold, the pair XAU/USD has moved to the negative territory during the European session.

Investors think over the recent decision by the US fed and the following up comments.

On Wednesday, the US Fed left interest rates unchanged, stating that the short-term risks to the economic growth have declined. The Fed upgraded assessment of the economic conditions in the country and also highlighted the improvements in the labor market.

The US Central Bank mentioned the possibility of the interest rate increase in the next few months, although, there were no clear indications of the rate increase in September.

It is likely that the rate will be raised by 0.25% in December.

If the Fed does decide to raise rates, it will be unfavorable decision for gold. High interest rates put downward pressure on gold, which does not bring interest income, therefore, demand for gold decreases with the increase of the borrowing costs for its acquisition and storage.

Possibility of the rate hike in the USA in September still remains. This fact will prevent excessive rise in the pair XAU/USD.

XAU/USD: Decisions of the US Fed and the Bank of Japan.  Fundamental analysis for 29.07.2016