Gold prices and the corresponding SPDR Gold Trust (ETF) (NYSEARCA:GLD) gained ground in Asian trading after the Bank of Japan announced mild stimulus measures, disappointing the expectations of many investors. The BOJ’s modest move on easing comes after the U.S. Federal Reserve also disappointed by leaving interest rates unchanged and only saying that it could see that near-term pressures on the economic had diminished.
The policy announcements by the Fed made investors doubtful about the health of the U.S. and Japanese economies seemed to have doused expectations.
The greenback has been sliding against a basket of global currencies following the Fed’s cloudy interest rate pathway. A weaker dollar benefits gold trading as it makes buying the yellow metal cheaper for traders holding currencies other than the greenback.
On the other hand, the yen firmed against the dollar in Friday’s trading after the BOJ disappointed with its mild easing plan. A stronger yen also created an opportunity for purchasers of dollar-denominated commodities to acquire them at a cheaper price.
Overall, the policy announcements by the Fed and BOJ created a sense of economic uncertainty among investors, thus the high appetite for gold, considered a safe-haven asset.
How gold fared in Asia
During Asian trading, prices of gold contracts for December delivery jumped 0.45% to $1,347.25 a troy ounce. But in earning morning hours of European trading, gold was seen easing with the yellow metal ceding 0.18% after rising to a session high of $1,350.45.
Gold prices could be volatile today as investors in different parts of the world continue to digest the BOJ’s policy action.
But fallout in the oil market could help drive up demand for more gold. In European trading prices of crude oil futures could be seen falling more than 0.70%. Rising crude oil stockpiles in the U.S. have triggered fears of another round of oil supply glut that could damage prices.
Other precious metals
Copper contracts for September delivery declined 0.4% to $2.206 a pound in Asian trading, while silver contracts for September delivery rose 0.57% to $20.307 a troy ounce.