Gold rose in Asia on Thursday as monetary policymakers around the world signaled accelerated steps to easing measures to avert economic recession. However, gold appeared to be edging lower in European trading a day after Britain got a new Prime Minister in Teresa May. An early morning pullback in gold in European hours also come on a day when the Bank of England is set to announce interest rate cuts to spur the growth of the domestic economy after the country decided to exit from the European Union.
How gold moved in Asia
Gold for August delivery gained 0.22% to $1,346.55 a troy ounce in Asian trading hours but is now down to $1,325 an ounce. A slower path to interest rate hikes in the U.S. and global economic concerns brought about by economic slowdown in China saw gold hit a 30-year high in the first quarter. The yellow metal is up nearly 27% so far in 2016.
Lower interest rates favor gold trading
Demand for gold tends to increase in an environment of lower interest rates. That is because yield-bearing assets such as equities and bonds become less attractive to investors when interest rates are lower. In that situation, investors turn to safe-haven assets such as gold.
Although a number of monetary regulators around the world are expected to roll out more easing steps to spur the economy artificially, talks of stimulating the economy by relaxing policies sometimes serve to make investors more wary about economic recovery. That explains why gold is seeing an uptick in demand as the Bank of Japan considers stepping up economic easing measures.
In Europe, the Bank of England is expected to announce a cut in interest rates today and the European Central Bank is expected to announce increased bond buying at a meeting of officials next week.
Other precious metals
Other than gold, silver also gained in Asian trading. Silver contracts for September delivery rose 0.39% to $20.492 a troy ounce though futures are now down to $20.19 in early morning trading. Copper bucked the trend as copper contracts for September delivery slumped 0.04% to $2.236 a pound.