Gold powers ahead after ECB cuts interest rates

Gold climbed more than 1 percent as the market took in news of fresh stimulus from the European Central Bank in the form of rate cuts. On Thursday, the ECB cut its main refinancing rate by 25 basis points to .5 percent. ECB President Mario Draghi vowed that monetary policy would remain accomodative.

By Barbara Kollmeyer and Carla Mozee
May 2, 2013, 11:17 a.m. EDT
Market Watch

SAN FRANCISCO (MarketWatch) — Gold futures climbed by more than 1% on Thursday, looking to recoup losses from the previous session, as the market took in news of fresh stimulus from the European Central Bank in the form of rate cuts.

Gold for June delivery GCM3 +1.46% jumped $23.30, or 1.6%, to $1,469.50 an ounce on the Comex division of the New York Mercantile Exchange. It had posted a decline of $25.90, or 1.8%, a day earlier.

Prices had swung higher in electronic trading after Comex trading closed Wednesday when the U.S. Federal Reserve left unchanged its bond-buying program and targeted interest rate, meeting widely held expectations.

On Thursday, the ECB cut its main refinancing rate by 25 basis points to 0.5%, and cut the interest rate on the marginal lending facility by 50 basis points to 1%. ECB President Mario Draghi vowed that monetary policy would remain accommodative, though at the same time he said it was already “extraordinarily accommodative.”

“Central-bank policy announcements over the last couple of days indicate that the era of easy money won’t be ending any time soon,” said Peter Grant, chief market analyst at USAGold.

“While the Fed offered up a little something for both doves and hawks in saying they are prepared ‘to increase or reduce the pace of its purchases to maintain appropriate policy accommodation’, economic data of late seems a little more biased to the former rather than the latter,” said Grant.

Expectations for a rate cut had risen in the wake of downbeat economic data from the euro zone, including reports of sluggish activity in the manufacturing sector and deteriorating conditions in the labor market.

Analysts have attributed recent strength in gold prices to expectations the Fed and the ECB will continue with their easy-monetary policies, as well as to stronger demand for physical gold.

“Friday’s [U.S.] employment data may provide additional clarity on this point,” said Grant. The government’s official employment report due out Friday is expected to show job creation faltered, with economists polled by MarketWatch forecasting a new increase of 135,000 jobs in April.

Data Thursday showed that jobless claims fell to their lowest level since January 2008.

The recovery in gold prices comes after a selloff in April on concerns about drops in exchange-traded gold products and cuts in gold-price forecasts. Investors pulled $6.77 billion out of the SPDR Gold Trust exchange-traded fund GLD +0.63% last month and lost its spot as the second-largest ETF.

Meanwhile, the July silver contract SIN3 +1.89% was up 49 cents, or 2.1%, to $23.84 an ounce on Thursday. Prices during Wednesday’s regular session slid 84 cents, or 3.5%.

Copper for delivery in July HGN3 +0.75% rose 3 cents, or 0.9%, to $3.11 a pound, after dropping 3.4% in the prior session.

July platinum PLN3 +1.74% jumped $14.30, or 1%, to trade at $1,483.80 an ounce, and June palladium PAM3 +1.29% rose $2.55, or 0.4%, to $687.30 an ounce.

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