Gold prices jumped 1% on Thursday after the Federal Reserve indicated it would be patient on raising interest rates and as the Bank of England defied expectations of more hawkish policy.
Spot gold was up 1% to $1,787.26 per ounce at 1241 GMT, after touching a three-week low on Wednesday. US gold futures for December delivery jumped 1.3% to $1,787.00 per ounce.
“Gold is trying to recover some of yesterday’s losses and the market is taking some comfort from the fact that there was no strong signal with regards to future rate hikes from the Fed,” Saxo Bank analyst Ole Hansen said.
The US central said on Wednesday it would start trimming its massive bond-buying program beginning this month, and stuck with its contention that high inflation would be transitory.
Following that, the Bank of England kept interest rates on hold on Thursday, dashing expectations for a hike that would have made it the first of the world’s big central banks to raise rates after the pandemic.
“There was some nervousness ahead of ahead of the Bank of England announcement… but since there was no change (in rates) that may have added additional bids to the market,” Hansen said.
Ultra-loose US monetary policy has helped drive gold sharply higher since the financial crisis of the late 2000s, with low interest rates cutting the opportunity cost of holding non-yielding assets and inflation fears stoking demand for a hedge.
Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of gold, which pays no interest.
Independent analyst Ross Norman said strong physical demand for gold was supporting market, as India’s Diwali festival generally boosts sales of the precious metal.
Elsewhere, spot silver rose 1.2% to $23.79 per ounce. Platinum gained 0.8% to $1,037.35 per ounce and palladium jumped 2.2% to $2,043.54 per ounce. (Reporting by Amy Caren Daniel in Bengaluru Editing by Robert Birsel and Mark Potter)