Gold climbs to 1-year high as dollar weakens

Singapore - Gold advanced to the highest level in a year after the European Central Bank indicated it wouldn’t cut interest rates further, boosting the euro and making dollar- denominated bullion less expensive for investors.

Bullion for immediate delivery rose as much as 1% to $1 284.64 an ounce, the highest since February 2015,
according to Bloomberg generic pricing. The metal, which is up 1.4% this week, traded at $1 277.12 by 10:45 a.m. in Singapore.

The euro could have its best week in more than a month against the dollar after ECB President Mario Draghi said more rate reductions probably won’t be needed after policy makers cut the benchmark rate to zero.

Draghi also said the recovery in the euro area continues to face hurdles including subdued demand in emerging economies and volatile financial markets. These factors have spurred investors to seek shelter in haven assets and powered gold’s 20% surge this year.

“Gold rallied after Draghi’s comment of ‘no need for further interest rate cuts’,” Australia & New Zealand Banking Group wrote in a note on Friday. “The recent change in policy stance will support financial buying in gold.

Gold holdings

Investors resumed building holdings in exchange-traded funds backed by gold, with assets rising 4.1 metric tons on Wednesday after dropping 1.1 tons the day before. The total stood at 1 728.1 tons, the highest since August 2014, according to data compiled by Bloomberg.

Gold-related equities rallied on Friday as a gauge of Asian shares fell. Newcrest Mining, Australia’s biggest gold producer rose as much as 3.9% in Sydney, while Zijin Mining Group surged as much as 7.4% in Hong Kong.

The euro strengthened 0.1% to $1.1184 against the dollar after surging 1.6% on Thursday. The common currency has risen 1.6% this week, the most since a 3% advance in the period ended February 5.

“Draghi’s comments boosted the euro against the dollar, and prices of precious metals rose,” Maike Futures said.

“As the outlook for US rates strengthens after the second quarter, the dollar will have a more solid foundation over the euro. This will gradually weaken the upside momentum of” gold.

Spot silver rose by 0.2%, while platinum added 0.4%.