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London - Gold erased earlier losses to trade near a three-week high after the Bank of England (BoE) cut interest rates and as traders awaited US data for clues on when the Federal Reserve may raise borrowing costs.
Bullion for immediate delivery rebounded from a 0.7% drop to trade little changed at $1 359.13 an ounce by 14:03, according to Bloomberg generic pricing. Priced in pounds, the metal rose as much as 1.7% to a three-week high.
Gold has rallied 28% this year as the Fed held back on tightening and other central banks pledged to do more to boost growth following the UK’s vote to exit the European Union. The BOE today unveiled an “exceptional” stimulus package as it cut rates for the first time in seven years. Looser monetary policy tends to bolster gold’s appeal as an alternative to currencies.
“The Bank of England did what many were expecting and gave the market what it has been waiting for,” said Naeem Aslam, a London-based chief market analyst at Think Markets UK by email. “The BOE can only mitigate the risk of recession with their QE, but we all know that this strategy is not really yielding the outcome which many are targeting and hence we are seeing this move for gold.”
BOE officials slashed their growth forecasts by the most ever and voted unanimously to reduce the benchmark by 25 basis points to a record-low 0.25%. Governor Mark Carney declared that all of the elements of the stimulus can be intensified. Investors will be looking at US jobs data tomorrow for more clues on when the Fed will raise rates.
Gold’s rally has been a boon for mining companies. Still, Randgold Resources is fighting to meet its full-year production target after operational problems at two of its African mines led to lower gold output and profit. The shares dropped as much as 12%, the most in four years, and were last down 4.6% in London.
In ETFs and other precious metals:
Holdings in gold-backed exchange-traded funds rose 2 metric tons to 2 025.7 tons on Wednesday, data compiled by Bloomberg show. That’s the highest level since July 2013. Silver prices fell 0.1% to $20.3945 an ounce in London. Platinum lost 0.3% and palladium was little changed.
