Gold futures have gained as traders bet demand for the metal would rise after the European Central Bank (ECB) lowered its interest rate and the Federal Reserve signalled a steady hand on its easy-money policies.
The most actively traded contract, for June delivery, on Thursday rose $US21.40, or 1.5 per cent, to settle at $US1,467.60 a troy ounce on the Comex division of the New York Mercantile Exchange.
The ECB on Thursday said it would cut its benchmark interest rate by 0.25 percentage points, a move widely expected as the euro-zone economy continues to struggle.
Gold, which yields no interest, tends to appeal to investors more when rates are low and central banks are moving to push more cash into the financial system. Some investors also buy gold as a hedge against the inflation that can follow accommodative monetary policy.
The Federal Reserve, in a statement on Wednesday at the conclusion of its two-day meeting, said it could increase or decrease the pace of bond purchases depending on how the economic situation evolved.
“We’ve heard from Europe, and the Fed,” said Frank Lesh, a broker with FuturePath Trading.
“There’s no change out there really. Investors are going to try to push gold higher” after the banks’ comments.
Gold prices were battered earlier this year as investors bet a recovering US economy would spur the Fed to pull the plug on its easy-money policies, but a recent streak of mixed economic data has limited those expectations.
Still, gold futures on Wednesday fell to a one-week low as cautious investors cashed out ahead of the Fed’s statement.
Gold prices have rebounded somewhat from the metal’s record-setting selloff last month, buoyed as investors ramped up purchases of gold coins and bars at the lowest prices in more than two years.
At the same time, however, investors in gold exchange-traded funds continued to cash out.
In the week ended Wednesday, exchange-traded funds sold a net 25 metric tons, or 900,000 ounces, of gold, according to UBS.
“The outflows have not yet slowed,” analysts with Credit Suisse said on Thursday in a note.
“There may be several million (ounces) more selling to come.”
Settlements (ranges include open-outcry and electronic trading):
London PM Gold Fix: $1,469.25; previous PM $1,454.75
Jun gold $1,467.60, up $21.40; Range $1,448.10-$1,473.30
Jul silver $23.830, up 48.70 cents; Range $23.370-$24.190
Jul platinum $1,500.20, up $30.70; Range $1,460.20-$1,501.80
Jun palladium $693.30, up $8.55; Range $682.95-$695.85
