Gold futures snapped a two-day loss to end higher on Friday, after China’s central bank unexpectedly slashed its key interest rates for the first time in more than two years in a bid to boost sagging growth momentum.
Nevertheless, a strong dollar and rising global equity markets amid expectations of additional stimulus from the European Central Bank capped gains, keeping the precious metal below the $1,200 mark. The S&P 500 and the Dow Jones Industrial Average made solid gains after China’s interest rate cut and on remarks from European Central Bank President Mario Draghi on additional stimulus to contain deflation.
The People’s Bank of China today cut its key lending rate by 0.4 percent to 5.6 percent, to spur economic growth. The deposit rate has been reduced by 0.25 percent to 2.75 percent. The surprise rate cut, which was the first reduction since July 2012, comes as the world’s second largest economy is forecast to log its weakest growth in nearly 25 years.
Gold for December delivery, the most actively traded contract, gained $6.80 or 0.6 percent to settle at $1,197.70 an ounce on the Comex division of the New York Mercantile Exchange on Friday.
Gold for December delivery scaled an intraday high of $1,207.60 and a low of $1,186.10 an ounce.
On Thursday, gold futures ended lower at $1,190.90 an ounce, down $3.00 or 0.3 percent, after a slew of mostly encouraging economic data from the U.S., including weekly jobless claims and a report on consumer price inflation.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained unchanged at 720.91 tons on Friday from its previous close of 723.01 tons.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 88.35 on Friday, up from its previous close of 87.70 late Thursday in North American trade. The dollar scaled a high of 88.39 intraday and a low of 87.45.
The euro trended lower against the dollar at $1.2382 on Friday, as compared to its previous close of $1.2539 late Thursday in North American trade. The euro scaled a high of $1.2568 intraday and a low of $1.2376.
In a significant move, the People’s Bank of China cut its key one-year lending rate by 40 basis points to 5.6 percent and the one-year deposit rate was lowered by 25 basis points to 2.75 percent.
Meanwhile, hopes of additional stimulus from the European Central Bank have increased after the bank’s President Mario Draghi said the ECB will expand its asset purchase program if inflation fails to show signs of returning to the targeted level.
Eurozone consumer confidence declined in November, defying expectations for an increase, preliminary data from the European Commission showed Friday. The flash consumer confidence indicator decreased to -11.6 from a -11.1 in October. Economists had forecast the index to rise to -10.7. For the EU, the consumer confidence index slid by 0.8 points to -8.2.
The leading index for Germany remained flat in September, data from the Conference Board showed Friday. The leading index was unchanged month-over-month in September after the 1.3 percent decline in August. The coincident index, a measure of current economic conditions, also remained flat in September following the 0.3 percent drop in the previous month.
The material has been provided by InstaForex Company – www.instaforex.com