Thursday, May 2, 2013

Gold futures spike to session highs after Draghi, ECB rate cut

Gold futures rose sharply on Thursday, hitting the highest level of the session as the European Central Bank cut interest rates to a record low in May.

Prices also remained supported after the Federal Reserve re-affirmed its commitment to leave interest rates unchanged near zero and continue buying USD85 billion in debt each month on Wednesday.

Gold can benefit from such an environment of easy money because of expectations that ample liquidity would put a damper on the value of paper currencies.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,465.15 a troy ounce during U.S. morning hours, up 1.3% on the day.

Comex gold prices rose by as much as 1.5% earlier in the day to hit a session high of USD1,467.85 a troy ounce. 

Gold prices were likely to find support at USD1,439.75 a troy ounce, the previous session’s low and near-term resistance at USD1,479.15, the high from April 30.

Speaking at the ECB’s post-policy meeting press conference, Draghi said that the central bank’s monetary policy has been "extraordinarily accommodative."

He added that the ECB will continue conducting the main refinancing operations as fixed-rate-tender procedures with full allotment for as long as necessary."  

Draghi’s comments came after the ECB cut the benchmark interest rate by 0.25 basis points to a record-low 0.5%.

The central bank also lowered its marginal lending to 1% from 1.5% and left its deposit facility rate unchanged at 0.0%.

Lower interest rates can give gold a lift, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout. 

Also Thursday, the U.S. Department of Labor said that the number of individuals filing for initial jobless benefits in the U.S. last week fell by 18,000 to a seasonally adjusted 324,000, the lowest level since January 2008.

Separate reports showed that the U.S. trade deficit narrowed more-than-expected in January, while U.S. non-farm productivity rose less-than-expected in the first quarter.

Market players now looked ahead to Friday’s highly-anticipated U.S. monthly jobs report to further asses the strength of the country’s economy and the need for further stimulus from the Federal Reserve.

Any improvement in the U.S. economy could scale back expectations for additional easing by the Fed.

The central bank said in a statement Wednesday that it would continue with its USD85 billion monthly bond-buying purchases, but added it may raise or cut the program, subject to economic conditions.

Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its bond-buying program sooner-than-expected.

Elsewhere on the Comex, silver for July delivery rallied 2.4% to trade at USD23.91 a troy ounce, while copper for July delivery jumped 1.4% to trade at USD3.123 a pound.

No comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...