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Gold whipsawed on Japan's surprise rates move

Jan 29 2016 11:02
Ranjeetha Pakiam

Singapore - Gold was whipsawed on Friday after the Bank of Japan (BOJ) surprised investors by adopting negative interest rates, spurring a brief rally in the dollar and arresting a monthly rally spurred by haven demand.

In the minutes after the BOJ decision, gold for immediate delivery sank as much as 0.6% to $1 108.45 an ounce , then steadied to trade little changed at $1 115.21 at 2:42 pm in Singapore, according to Bloomberg generic pricing. Bullion is still set for the largest monthly gain since January 2015, up 5.1%.

“The dollar-yen is reacting against the BOJ’s decision to introduce minus interest rates,” Tetsu Emori, president of Emori Capital Management, said from Tokyo. “The yen has been weakening against the dollar” and that has affected gold, he said.

Gold made a bullish start to 2016 as investor concern that China’s growth was sagging and tumbling equity prices reinvigorated demand for haven assets and prompted traders to pare bets on US rate increases this year.

The Bank of Japan’s move to try to stoke inflation in Asia’s second-largest economy - which may boost the dollar - comes after the European Central Bank indicated it could add stimulus as soon as March.

Gold’s swings on Friday matched volatile moves in other assets. After the BOJ decision, which was endorsed in a 5 to 4 vote by policy makers, Asian shares rose to a two-week high and the yen fell, while the dollar surged as much as 0.6% before paring gains.

In January, spot silver climbed 3%, while platinum lost 2.7% and palladium slumped 12%.

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commodities  |  gold  |  markets

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