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Reports UK

UK stock market commentary (June 20, 2014): Gold, Gold, Gold

June 20, 2014, Friday, 06:06 GMT | 01:06 EST | 09:36 IST | 12:06 SGT
Contributed by Capital Spreads

European equities are set to open up this morning after a very quiet Asian session. Investors are wagering on continued relaxed monetary policy in Europe and the US for a while yet. This was highlighted by one of the single greatest rises in Gold in the last 12 months. After a hectic FOMC on Wednesday European equities did not move much throughout the day and with no significant news out tomorrow investors may hold off and get ready to go again next week.

Albeit at a reduced pace, the Dow Jones extended its gains yesterday to 16,900, a 11 pips rise for the session following another dovish statement from the Fed. Chairman Janet Yellen said that ‘accommodative monetary policy, rising stocks and property should lead to above trend economic growth’. So, it was little surprise to see investors sticking with the equity markets.

The shared currency climbed for the second straight day against the greenback after the Federal Reserve stated it will hold interest rates at near zero level for a considerable time. Despite the solid economic data, it appears the Fed kept a cautious tone thus hurting the dollar which was firmly on its way up. The EUR/USD pair closed 16 pips higher at 1.3607.

Islamist militants in Iraq (now OPEC’s second largest producer) attacked the country’s biggest oil refinery, fuelling concerns of serious supplies disruptions. That sent the WTI crude prices 34 cents higher to $106.07 a barrel. On top of that we saw the US oil inventories dropping last week which should also provide support to crude prices.

The super dovish views expressed by the Fed, were not in line with the recent economic strength. And the promise to keep rates on hold boosted demand for gold which enjoyed yesterday a sharp rally of $42.5 to finish at $1320.00. The conflict in Iraq also revived investors’ interest for gold as a hedge in times of turmoil.