Investor appetite for gold and SPDR Gold Trust (ETF) (NYSEARCA:GLD) is soaring just a day after the Bank of England announced bolder stimulus measures than economists had anticipated. Traders also appear to be jostling for safe-haven assets as the release of U.S. monthly employment data approaches.
Investors are not sure what to expect in the jobs data to be released later today by the Labor Department. But data from payroll processor company ADP have shown that U.S. employers added 179,000 jobs in July, signaling a slowing labor market.
How gold moved
Gold futures for December delivery hit a session high of $ at $1,370.95 a troy ounce in early morning in European trading on Friday. Earlier, the prices of the yellow metal rose in Asian trading.
Gold finished Thursday’s session on a positive note, rising 0.20% to $1,367.40.
BOE’s record rate cut to 0.25% from 0.5% coming hot on the heels of a similar record move by the central bank in Australia has signaled to investors recovery of the global economy could be prolonged.
In times of economic uncertainty, investors tend to reduce their exposure to riskier investments as they take cover in safe-havens such as gold. That explains why the yellow metal is gaining following the announcement of aggressive stimulus measures by BOE. On top of cutting rate to a record low, the central bank also boosted its bond buying program by £70 billion, with £60 billion targeting government debt and £10 billion to go to private bonds.
Mixed U.S. data released Thursday also affected the dollar, leading to the dollar index sliding. A weaker dollar favors gold traders as it makes the precious metal more affordable for investors holding currencies other than the greenback.
The downbeat data from the U.S. was the report that initial unemployment claims increased by 3,000, yet analysts expected the jobless claims to only increase by 1,000.
Sliding oil and iPath S&P GSCI Crude Oil Total Return (NYSEARCA:OIL) is also turning risk-averse investors to gold. Attention has turned to China’s oil imports after fresh data showed that U.S. crude and gasoline inventory declined beyond expectation.