Gold rises after ECB rate cut

Gold rose after the European Central Bank (ECB) cut its interest rate for the first time in 10 months and President Mario Draghi said the central bank is technically ready for negative deposit rates. Lower interest rates favor gold as they encourage investors to put money into non-interest-bearing assets like the metal. “When Draghi today comes along and says that the central bank is getting ready for negative interest rates, meaning it has all the ammunitions in place, what this suggested is that the opportunity cost to hold gold will remain low,” VTB Capital analyst Andrey Kryuchenkov said. Gold rose to a session high of $ 1,473.40 an ounce after the rate decision and was at $ 1,470.86 by 1454 GMT, still up 1 percent. The metal had shed more than 1 percent in the previous session — its biggest daily drop since bullion’s historic decline in mid-April — to a low of $ 1,439.74, the weakest since April 25. US gold for June delivery rose 1.6 percent to $ 1,469.30 an ounce. The metal gained even as the dollar strengthened against the euro and other currencies after the ECB lowered its main rate by a quarter percentage point to 0.50 percent, and pledged as much liquidity as euro zone banks need well into next year. Physical market activity slowed after a recent surge in the purchase of gold bars, coins and nuggets across Asia sent premiums for gold bars to multi-year highs. Gold’s second-largest consumer China resumed trading after a three-day holiday, but demand seemed slower than a week ago, while the physical market in Hong Kong was also easier. Gold’s sell-off last month has widened a disconnect between funds that sold on dissatisfaction over bullion’s underperformance and individual investors who could not get enough physical gold coins and bars at bargain prices. In other precious metals, silver rose 1.7 percent to $23.96 an ounce. Platinum was up 1.3 percent to $ 1,489.99 an ounce. Palladium rose 0.7 percent to $ 690.22, having hit a two-week high of $ 700.72 on Tuesday. Source: ArabNews